Compute the cost of capital for the firm

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Reference no: EM13909428

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

A. A bond that has a $1000 par value (face value) and a contract or coupon interest rate of 10.4%. Interest payments ar $52.00 and are paid semi annually. The bonds have a current market value of $1,122 and will mature in 10 years. The firm’s marginal tax rate is 34%.

B. A new common stock issue that paid a $1,77 dividend last year. The firm’s dividends are expected to continue to grow at 6.2% per year, forever. The price of the firm's common stock is now $27.56.

C. A preferred stock that sells for $145, pays a dividend of 8.4% and has a $100 par value.

D. A bond selling to yield 11.4% where the firm's tax rate is 34%

Reference no: EM13909428

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