Determine the marginal cost of capital schedule

Assignment Help Financial Management

Reference no: EM13927494

Penguin Industries, Inc., has a capital structure that currently consists of 40 per- cent debt and 60 percent common stock, which it considers optimal. Penguin can raise up to $60 million in long-term debt at a pretax cost of 10 percent. Above $60 million, the pretax cost of debt is expected to increase to 14 percent. The company's marginal tax rate is 40 percent. Its stock currently sells for $60 per share and has a beta of 1.20. The company is expected to pay a $3.60 per share dividend next year, which is expected to grow at a rate of 6 per- cent per year for the foreseeable future. Penguin expects to generate $180 million in retained earnings during the coming year. New shares can be sold to net the company $56 per share. Determine the marginal cost of capital schedule and the break points in the schedule for Penguin.

Reference no: EM13927494

Questions Cloud

What level of significance would she use in testing : A researcher wanted to test a new diabetes drug: What level of significance would she use in testing?

Mendel claimed proportion : Based on the result, is 787 offspring plants with long stems unusually low? What does the result imply about Mendel's claimed proportion of 3/4?

Prices at the local quick market : Prices at the local quick market (convenience store) will probably be lower than at the regional big box retailer (grocery store).

Mileage among the two-seater cars : The BMW Z8, Ferrari, and Lamborghini have notably low gas mileage among the two-seater cars in the table below). Find the five-number summary (median, the quartiles (first and third quartile), and the high and low extremes) of the city gas mileage..

Determine the marginal cost of capital schedule : New shares can be sold to net the company $56 per share. Determine the marginal cost of capital schedule and the break points in the schedule for Penguin.

Increase productivity and long-run growth : Are there circumstances in which it might be possible that deficits could increase productivity and long-run growth?

Quantitative variable the telephone number of individual : An example of a quantitative variable is the telephone number of an individual. If we examine some of the population measurements, we are conducting a Sample of the population.

Write a matlab script using the randn command : Write a Matlab script using the "randn" command to generate a vector of 10,000 random numbers that are normally distributed around zero, with a variance of 1. Use the "hist" command to plot a histogram of these data, specifying 50 bins.

Chasing chipmunks in the front yard : The author's cat enjoys chasing chipmunks in the front yard. In this game, the cat sits at one edge of a yard that is w = 29 m across (see figure), watching as chipmunks move toward the center.

User Account

All Pages