Reference no: EM132645752
The stock of Matrix Computing sells for $65, and last year's dividend was $2.53. Security analysts are projecting that the common dividend will grow at a rate of 9% a year. A flotation cost of 12% would be required to issue new common stock. Matrix's preferred stock sells for $42.00, pays a dividend of $3.32 per share, and new preferred stock could be sold with a flotation cost of 10%. The firm has outstanding bonds with 25 years to maturity, a 15% annual coupon rate, semiannual payments, $1,000 par value. The bonds are trading at $1,271.59. The tax rate is 20%. The market risk premium is 5.5%, the risk-free rate is 7.0%, and Matrix's beta is 1.2. In its cost-of-capital calculations, Matrix uses a target capital structure with 40% debt, 10% preferred stock, and 50% common equity.
Problem a. Calculate the cost of each capital component-in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the CAPM method and the dividend growth approach to find the cost of equity.
Problem b. Calculate the cost of new stock using the dividend growth approach.
Problem c. Assuming that Matrix will not issue new equity and will continue to use the same tar-get capital structure, what is the company's WACC
|
Write the journal entry to record the investment in stem
: Coop's total shareholders' equity was $500,000, and the fair value of its net assets was $600,000. Write the journal entry to record the investment in stem.
|
|
Describe how depressive disorder would benefit judy
: Explain whether a diagnosis of any of the depressive disorder would benefit Judy in the development of a treatment plan and how?
|
|
How are the two shareholders taxed on the distribution
: Black Corporation and Tom each own 50% of Tan Corporation's common stock. How are the two shareholders taxed on the distribution
|
|
How much will face value of the bond that will be investing
: At retirement you liquidate your account and use the funds to buy an investment, How much will the face value of the bond that you will be investing?
|
|
How do calculate the cost of each capital component
: Calculate the cost of each capital component-in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs)
|
|
How do solve the monthly payment in retirement account
: At retirement you liquidate your account, Calculate the monthly payment in your retirement account in order to be able to achieve the plan mentioned above?
|
|
Demonstrate connection to your desired work environment
: Demonstrate a connection to your current work environment. If you are not employed, demonstrate a connection to your desired work environment.
|
|
How many business combinations did the company report
: What are the components of acquisition costs, e.g. cash consideration and noncash consideration? How many business combinations did the company report?
|
|
Designing team and team identity
: Think about how to build teams in terms of designing the task, selecting the people, and then, managing their relationships.
|