Calculate the cost of existing debt

Reference no: EM132074883

Question: Rollins Corporation is estimating its WACC. It's current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, paid semiannually, a current maturity of 20 years, and sell for $1,040. The firm could sell, at par, $100 preferred stock which pays a $12.00 annual preferred dividend. Rollins' common stock beta is 1.2, and the risk-free rate is 10 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00. Its stock sells for $27.00 per share, and has a growth rate of 3 percent. The floatation cost is 5% for debt, 10% for preferred stock, and 25% for common stock. The firm's marginal tax rate is 40 percent.

Part a. Calculate the cost of existing debt. Part b. Calculate the cost of new debt.

Part a. Calculate the cost of existing preferred stock. Part b. Calculate the cost of new preferred stock.

Part a. Calculate the cost of existing common stock. Part b. Calculate the cost of new common stock.

Reference no: EM132074883

Questions Cloud

Evaluate the components of operational risk : Identify two insurance regulations and analyze their roles in managing risks within the insurance industry.

Recommend a course of action in a business situation : A case is a scenario that gives you the opportunity to identify problems and recommend a course of action in a business situation.

There are diverse types of restaurant ownership : In the restaurant industry, there are diverse types of restaurant ownership. What is the fastest growing trend of characteristics of restaurants today?

Describe the demographics and geography : Describe the demographics (gender, ethnicity, socio-economic) and geography (location and environmental features).

Calculate the cost of existing debt : Rollins Corporation is estimating its WACC. It's current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common.

Medicare-medicaid play in financing long-term care services : Compare and contrast the roles that Medicare and Medicaid play in financing long-term care services.

What types of advertising are being used : Pick two of the insurance companies noted in the case on Marshall, pp. 411-412. What types of advertising are being used by these insurance companies?

Determine what is the pure bond value : Rorals Corporation has a convertible bond outstanding. The par value is $1,000, the coupon rate is 9%, and the bond matures in 25 years.

First the research or the marketing research : For your scheduling chart-whichever one you decide on-you need to put each of these components in order.

User Account

All Pages