Calculate the cost of preferred stock

Assignment Help Financial Management

Reference no: EM131586724

Suppose you are given the following information for Wonder Inc.

Debt: 25,000 bonds outstanding, with a face value of $1,000. The bonds currently trades for 96.667% of par and have 10 years to maturity. The coupon rate equals 7.25%, and the bonds make semi-annual coupon payments.

Common stock: 450,000 shares of common stock outstanding; currently trading for $142.81 per share. Beta equals 1.23.

Preferred stock: 90,000 shares of preferred stock outstanding; currently trading for $112.5 per share; pays a $6.25 dividend every year.

Market: The expected return on the market equals 9%, and the risk free rate is 2%.

Tax rate: 35%

Calculate the cost of preferred stock. (Enter percentages as decimals and round to 4 decimals)

Reference no: EM131586724

Questions Cloud

What role these have on the way the business operates : Explain what role these have on the way the business operates. Evaluate whether the company's actions seem to align to their vision and mission statements.

Polynomial ring over ring a and q is a p-primary ideal of a : Let B = A[x] be a polynomial ring over a ring A and let I be an ideal of A. Prove (A/I)[x] B/IB, where the left-hand side is a polynomial ring.

The expected return for a stock can be found using : The expected return for a stock can be found using

What benefit would analysis have for leaders : Describe the steps a leader might take to assess individual and group dynamics within a team

Calculate the cost of preferred stock : Calculate the cost of preferred stock.

Calculate the expected rate of return on the stock : Calculate the expected rate of return on the stock.

Calculate prices and prepare profit statement : BSBSMB402A PLAN SMALL BUSINESS FINANCES ASSESSMENT TASKS. Identify costs, calculate prices and prepare profit statement

Source market value market proportions costs : Source Market Value Market Proportions Costs Weighted Costs Debt $ .0122 Preferred 1,080,000 Equity .6489 Total ? WACC = ?

Problem related to a polynomial ring : Let R be a polynomial ring over an infinite field k and I a graded ideal of height r. If I is minimally generated by forms of degree p = 1.

User Account

All Pages