Reference no: EM132904551
The stock of Matrix Computing sells for $65, and last year's dividend was $2.53. Security analysts are projecting that the common dividend will grow at a rate of 9% a year. A flotation cost of 12% would be required to issue new common stock. Matrix's preferred stock sells for $42.00, pays a dividend of $3.32 per share, and new preferred stock could be sold with a flotation cost of 10%. The firm has outstanding bonds with 25 years to maturity, a 15% annual coupon rate, semiannual payments, $1,000 par value. The bonds are trading at $1,271.59. The tax rate is 20%. The market risk premium is 5.5%, the risk-free rate is 7.0%, and Matrix's beta is 1.2. In its cost-of-capital calculations, Matrix uses a target capital structure with 40% debt, 10% preferred stock, and 50% common equity.
Problem a. Calculate the cost of each capital component-in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the CAPM method and the dividend growth approach to find the cost of equity.
Problem b. Calculate the cost of new stock using the dividend growth approach.
Problem c. Assuming that Matrix will not issue new equity and will continue to use the same tar-get capital structure, what is the company's WACC
|
How many shares have been issued
: The balance sheet for Ronlad Corporation reported 185,000 shares outstanding, 283,000 shares authorized, How many shares have been issued
|
|
Feasibility study and cost-benefit analysis
: Distinguish between a feasibility study and a cost-benefit analysis. Summarize the cost-benefit analysis for your hypothetical e-commerce company.
|
|
How much money will need to deposit into the account? today
: Your brother has offered to give you $160?, starting next? year, How much money will you need to deposit into the account? today?
|
|
What amount is the total income to be recognized
: Shelley Corporation acquired $6,000,000 of Zogie Inc.'s 12% bonds on May. What amount is the total income to be recognized in the Income Statement for 2021
|
|
Calculate the cost of each capital component
: Calculate the cost of each capital component-in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs)
|
|
Difference between power-authority and leadership
: Describe the difference between power, authority, and leadership. Do you know who the power structure is in your organization?
|
|
What are issues of standardization and localization
: What are the issues of standardization and localization in general for MNEs and how do they particularly manifest themselves in IHRM activities?
|
|
Find out benefit of individual expense habitats
: Find out benefit of individual expense habitats and in general productivity of the worry. Settle Ltd. is having creation shops figured as cost focuses.
|
|
Calculate the CCA and indicate any recapture
: Calculate the CCA for 2020 and indicate any recapture, terminal losses or taxable capital gains that may need to be added to income
|