Reference no: EM13868491
Compute the cost of capital for the firm for the following:
a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.9 percent. Interest payments are $59.50 and are paid semiannually. The bonds have a current market value of $1,122 and will mature in 10 years. The firm’s marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.84 dividend last year. The firm’s dividends are expected to continue to grow at 6.5 percent per year, forever. The price of the firm’s common stock is now $27.69.
c. A preferred stock that sells for $144, pays a dividend of 8.9 percent, and has a $100 par value.
d. a Bond selling to yield 11.4 percent where the firm’s tax rate is 34 percent.
a. The after-tax cost of debt is ____% (Round to two decimal places)
b. The cost of common equity is ____% (Round to two decimal places)
c. The cost of preferred stock is ____% (Round to two decimal places)
d. The after-tax cost of debt it ____% (Round to two decimal places)
|
About the cash conversion cycle
: Primrose Corp has $16 million of sales, $1 million of inventories, $2 million of receivables, and $2 million of payables. Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 7% rate. How much cash would be fr..
|
|
Capital rationing investment funds constraint
: Describe how the profitability index approach may be used by a firm faced with a capital rationing investment funds constraint.
|
|
Calculate component weights of capital
: As a consultant to GBH Skiwear, you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. Calculate component weights of capital. The weight of debt in the firm’s capital struct..
|
|
What must he save per month to achieve this goal
: Bob would like to have $26,000 in 5 years to use as a down payment on a house. He plans on depositing an equal of money at the end of every month to save for this goal. If Bob can earn 6% interest per year(0.5% interest per month) what must he save p..
|
|
Compute the cost of capital for the firm
: Compute the cost of capital for the firm for the following: A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.9 percent. Interest payments are $59.50 and are paid semiannually. The bonds have a current marke..
|
|
Earnings before interest and taxes and net income decrease
: (leverage and EPS) You have developed the following pro forma income statement for your corporation: If sales should increase by 25 percent, by what percent would earnings before interest and taxes and net income increase. If sales decrease by 25 per..
|
|
About the lockbox system
: Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. hat is the maximum monthly cha..
|
|
Consider an annual coupon bond with face value
: Consider an annual coupon bond with a face value of $100, 12 years to maturity, and a price of $95. The coupon rate on the bond is 4%. If you can reinvest coupons at rate of 2% per annum, then how much money do you have if you hold the bond to maturi..
|
|
What is the present value of all future earnings
: Analysts predict that its earnings will grow at 30% per year for the next 5 years. After that, as competition increases, earnings growth is expected to slow to 5% per year and continue at that level forever. Your company has just announced earnings o..
|