Compute the cost of capital for the firm

Assignment Help Financial Management

Reference no: EM131867841

1. The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the:

2. Compute the cost of capital for the firm for the following:

a. A bond that thas a $1000 par value (face value and a contract or coupon interest rate of 11 percent. Interest payments are $55 and are paid semi annually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percent.

b. A new common stock issue that paid a $1.80 dividend last year The firms dividends are expected to continue to grow at 7 percent per year, forever. The price of the firm's common stock is now $27.50

c. A preferred stock that sells for $125, pays a 9 percent dividend, and has a $100 par value.

d. A bond selling to yield 12 perecent where the firm's tax rate is 34 percent.

Reference no: EM131867841

Questions Cloud

How can we use the t-test for testing hypothesis : How can we use the t-test for testing hypothesis whether the reduced turnover rate for company results in better profits?

Required rates of return on individual securities : The security market line is equation that shows relationship between risk as measured by beta and the required rates of return on individual securities.

What is difference in maturity risk premiums on two notes : If 2-year and 5-year Treasury notes both yield 10%, what is the difference in the maturity risk premiums (MRPs) on the two notes;

Estimating share value using the dcf model : Estimating Share Value Using the DCF Model Following are forecasts of Whole Foods sales, net operating profit after tax (NOPAT),

Compute the cost of capital for the firm : Compute the cost of capital for the firm for the following:

Economic interpretation of the corporate cost of capital : What is meant by a firm’s debt capacity? What is the economic interpretation of the corporate cost of capital?

What is the real value of the payment : A bank makes a 30 year Fully Amortizing FRM for $1,500,000 at an annual interest rate of 6% compounded monthly, What is the real value of the 120th payment?

What is the fully indexed rate on the loan in one year : In one year after the loan is originated, the Libor is 7.20%. What is the fully indexed rate on the loan in one year?

Arrange trust for her descendant education : Having just sold a unicorn startup, a now-wealthy entrepreneur would like to arrange a trust for her descendant's education.

User Account

All Pages