Reference no: EM13808357
A firm has determined its optimal structure which is composed of the following sources and target market value proportions.
Debt: The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of $50.
Common Stock: A firm's common stock is currently selling for $75 per share. The dividend expected to be paid at the end of the coming year is $5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago the dividend was $3.10. It is expected that to sell, a new common stock issue must be underpriced $2 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm has a marginal tax rate of 40 percent.
1) The firm's before-tax cost of debt is ________.
A) 7.7 percent B) 11.2 percent C) 12.7 percent D) 10.6 percent
2) The firm's after-tax cost of debt is ________.
A) 7.7 percent B) 7 percent C) 6 percent D) 4.6 percent
3) The firm's cost of a new issue of common stock is ________.
A) 16.7 percent B) 10.2 percent C) 14.3 percent D) 17.0 percent
|
Roles and responsibilities of managers
: The roles and responsibilities of managers and leaders are closely intertwined and related; however, a manager is not necessarily a leader and a leader is not necessarily a manager.
|
|
What kinds of risk are included in investment risk
: What kinds of risk are included in investment risk? Go online to survey current or recent financial news. Find and present a specific example of the impact of each type of investment risk. In each case, how did the type of risk affect investment perf..
|
|
Discuss the economic-political-educational-family
: Briefly discuss the economic, political, educational, family, and marital systems of a country of your choice. Include a response to the following questions in your discussion:
|
|
Rate of return on the market portfolio of assets
: Dr. Dan is considering investment in a project with beta coefficient of 1.75. What would you recommend him to do if this investment has an 11.5 percent rate of return, risk-free rate is 5.5 percent, and the rate of return on the market portfolio of a..
|
|
Debt and common stock
: A firm has determined its optimal structure which is composed of the following sources and target market value proportions. Debt: The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,050. A flotation cost of 2 percent of the face valu..
|
|
Dynamic behavior of the working pointers
: Dynamic behavior of the working pointers the four LinkedList Methods: Append(), Display(), Insert(), and Delete() in the Chapter 17 LinkedList Template (LinkedList.h) Version 2
|
|
Explain how the federal government promotes business
: Explain how the federal government promotes business, labor, and agriculture in the United States. Also, describe how the federal government uses its monetary policy as an economic management tool.
|
|
Normal distribution and standard deviation of the population
: What percentage of the time does a lathe produce more than 27 components per hour?
|
|
Series of arithmetic problems
: This program will ask the user to answer a series of arithmetic problems and report on how the user performs. You will write this program in phases as specified below. Make sure that each phase works correctly and uses good style before progressin..
|