Compute after-tax cost of each component of capital

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Reference no: EM131501399

The Killington Corporation has planned capital expenditures of $40 million for the upcoming fiscal year. Killington's stock is currently selling at $25 per share. Flotation costs are 10%. The earnings growth rate has been steady and is expected to continue. The last dividend paid was $1.20 per share and is expected to grow at a rate of 5%. The company tax rate is 40%. The Mortgage bonds are currently selling for $1,073.61. The bonds are 7%, $1,000 par and pay interest annually. They will mature in 10 years.

Compute the after-tax cost of each component of capital.

a) Bonds

b) Retained Earnings

c) New Common Stock

Reference no: EM131501399

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