Reference no: EM131013779
A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions.
Target Market
Source of Capital Proportions
Long-term debt 20%
Preferred stock 10%
Common stock equity 70%
Debt: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of
2 percent of the face value would be required in addition to the discount of $40.
Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $3 per share.
Common Stock: A firm's common stock is currently selling for $18 per share. The dividend expected to be paid at the end of the coming year is $1.74. Its dividend payments have been growing at a constant rate for the last four years. Four years ago, the dividend was $1.50. It is expected that to sell, a new common stock issue must be underpriced $1 per share in floatation costs. Additionally, the firm's marginal tax rate is 40 percent.
1. The firm's before-tax cost of debt is
2. The firm's after-tax cost of debt is
3. The firm's cost of preferred stock is
4. The firm's cost of a new issue of common stock is
5. The firm's cost of retained earnings is ________.
6. The weighted average cost of capital up to the point when retained earnings are exhausted is
|
Provide a brief description of an optical fiber
: Discuss the dependence of the number of propagating modes in a dielectric slab waveguide on the ratio of the thickness d of the dielectric slab to the wavelength l0.
|
|
Divided income from shares in a shares
: New Hope Managed Care Inc., is a for-profit managed care company that serves the southwest United States. Last year, it reported $1,200,000 in income from operations, $250,000 in interest income from bonds it bought in the previous year, and $60,000 ..
|
|
Find all values of c in the given interval
: Then find all values of c in the interval [a, b] satisfying f' (c) = {f(b) - f(a)} / (b-a) If there is more more than one enter them as a comma separated list.
|
|
Why is it important in the study of cognition
: In cognition, one major area of discussion is the influence of nature and nurture. What is the concept of nature-nurture, and why is it important in the study of cognition
|
|
Firm has determined its optimal capital structure
: A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a..
|
|
Discuss an application of the brewster angle effect
: What is the Brewster angle? What is the polarization of the reflected wave for an elliptically polarized wave incident on a dielectric interface at the Brewster angle? Discuss an application of the Brewster angle effect.
|
|
Firm has a target debt–equity ratio
: Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.89 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt–equity ratio..
|
|
Calculate the equity ratio
: 1. Calculate the equity ratio based on the following information: cash = $14,870; accounts receivable =$22,108: prepaid $3,010; supplies = $927; equipment = $62,150
|
|
The supplies account had a beginning balance
: Journalize the adjusting entry required at the end of the year (December 31), assuming the amount of supplies on hand is $2,980.
|