Find what the cost of capital for retained earnings is

Assignment Help Accounting Basics
Reference no: EM132807204

The management of LIVE has been reviewing the company's financing arrangements. The current financing mix is P750,000 of common stock, P200,000 of preferred stock (P50 par) and P300,000 of debt. LIVE currently pays a common stock cash dividend of P4. The common stock sells for P50, and dividends have been growing at about 10% per year. Debt currently provides a yield to maturity to the investor of 12%, and preferred stock pays a dividend of 9% to yield 11%. Any new issue of securities will have a flotation cost of approximately 3%. LIVE has retained earnings available for the equity requirement. The company's effective income tax rate is 30%.

Problem 1: Based on this information, the cost of capital for retained earnings is

Reference no: EM132807204

Questions Cloud

Prepare the journal entries to record ibrahim withdrawal : Prepare the Journal Entries to record Ibrahim's withdrawal under each of the assumptions Ibrahim is paid 45,000 and the difference is recorded as a bonus
Determine the expected dividend at the end of year 5 : Blossom Natural Foods' current dividend is $11.00. You expect the growth rate to be 0 percent for years 1 to 5, and 2 percent for years 6 to infinity.
Different styles of leadership : Based on the different styles of leadership, which style would be most appropriate to address the issue with the ES employees? Why?
What is the expected dividend for year : What is the expected dividend for year 10 if the required return is 18%?
Find what the cost of capital for retained earnings is : Find what the cost of capital for retained earnings is? The management of LIVE has been reviewing the company's financing arrangements.
Calculate kingbird current share price : The T-bill rate is 4.6 percent and the risk premium of Kingbird Ltd. is 8.1 percent. Calculate Kingbird's current share price.
Legal Liability and the Gig Economy : Uber is largely hailed as the advent of the gig economy, Identify the steps Uber can take, if any, to limit its legal exposure due to the conduct of its driver
Should ligaya management proceed with capital and why : Management is considering a change in the capital structure to 30 percent debt. Should LIGAYA's management proceed with the capital structure change? Why?
What is the multi-stage ddm applied price : What is the multi-stage DDM applied price of a stock that is expected to begin paying a $3 dividend 6 years from now.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Would you consider felixs performance for the year

Did Felix earn a net income or suffer a net loss for the year - Compute the amount and would you consider Felixs performance for the year to be good or bad? Give your reason.

  What can we do now to recover more quickly later

How will we notify employees, responders, neighbors, government, community, media, and others of emergency conditions?

  What does owners investment mean

What does owners investment mean? What is fixed assets and why is it important for a business to measure depreciation

  What will be the balance in allowance for bad debts

Net credit sales for the year totaled $200,000. What will be the balance in allowance for bad debts after the adjusting entry is recorded

  What additional factors must be recognized by a company

The children's department of a major department store had. What additional factors must be recognized by a company that uses a JIT inventory system?

  Determine the companys margin of safety

Determine the break-even point in sales units and the break-even point in sales units if the company desires a target profit of $25,000 - Determine the companys margin of safety

  Find a current event within the last one-two years

Find a current event, within the last 1-2 years, that involved a crisis or scandal. Give a brief synopsis of the company and the issue

  Employees are a part of the cash disbursements cycle why is

employees are a part of the cash disbursements cycle. why is it important that a company have all of its employees in

  Discuss double-declining-balance depreciation

Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the double-declining-balance

  Determining cost of the truck

Hector Gonzales Company incurs these expenditures in purchasing a truck: cash price $18,000; accident insurance (during use) $2,000; sales taxes $900; motor vehicle license $300; and painting and lettering $1,200. What is the cost of the truck?

  Calculate earnings per share data for crane corporation

Crane Corporation,Calculate earnings per share data as they should appear on the 2017 income statement of Crane Corporation. (Round answers to 2 decimal places

  How corporations were operating at that time

Include at least two examples of the flaws that the Global Financial Crisis of 2007- 2008 highlighted existed in relation to how corporations were operating

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd