Solution-Cost of preferred stock capital

Cost of preferred stock capital

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Reference no: EM131139066

Ink Inc. has decided that the capital it is raising will consist of 10% preferred stock, 50% common stock, and 40% debt. Ink has outstanding 20 year annual, 6% coupon bonds selling for $894. The par value of the bonds is $1,000. Ink’s common stock sells for $50 per share and is expected to grow at 8% and expected to pay a $2 dividend next year. If Ink sells new common it must pay a $5 per share flotation fee. Ink’s preferred stock currently sells for $54, and its annual dividend is $5 per share. If Ink were to sell new preferred stock, it would pay $4 per share as flotation cost. Ink’s tax rate is 40%.

What is Ink’s?

1. After tax cost of debt capital?

2. Cost of preferred stock capital?

3. Cost common stock?

4. Cost of capital?

Reference no: EM131139066

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Cost of preferred stock capital

Reference no: EM131139066

Reference no: EM131139066

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