Compute the cost of capital for the firm

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Compute the cost of capital for the firm for the following: a. A bond that has a $1,000.00 par value (face value) and a contract or coupon interest rate of 11.7 percent. Interest payments are $58.50 and are paid semiannually. The bonds have a current market values of $1123 and will mature in 10 years. The firm’s marginal tax rate is 34 percent. b. A new common stock issue that paid a $1.83 dividend last year. The firm’s dividends are expected to continue to grow at 6.4 percent per year, forever. The price of the firm’s common stock is now $27.03. c. A preferred stock that sells for $129, pays a dividend of 9.8 percent, and has a $100 par value. d. A bond selling to yield 11.3 percent where the firm’s tax rate is 34 percent. a. The after-tax cost of debt is ___%.

Reference no: EM13927984

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