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Metacorp Limited plans to raise new capital for its project in Queensland. You are employed to estimate its cost of capital for use in capital budgeting decision. The treasurer has given you the following information and has asked you to calculate the weighted average cost of capital for the company.The company currently has an outstanding bond with 12% coupon rate and a convertible bond with an 8.1 % coupon rate. The firm has been informed by an investment banker that bonds of equal risk and credit rating are now selling at a yield of 14 % per annum. The common stock has a price of $30 with an expected dividend (D1) of $1.30 per share. The expected growth rate for earnings and dividends per share is 12% per annum in the future. The preference stock is selling at $60 per share and carries a dividend of $6.80 per share. The flotation costs are 3% of the selling price for the preference shares, no floatation costs will be incurred for any new debt and common stocks issued. The capital structure of the firm is comprised of 45% debts, 5 % preference shares and 50% common shares. The corporate tax rate is 30%.Calculate the cost of capital for the individual components in the capital structure, and then calculate the weighted average cost of capital for Metacorp. Consider after-tax cost of capital in your calculations.
The next dividend payment by Blue Cheese, Inc., will be $2.08 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $42 per share, what is the required return?
A 20-year U.S. Treasury bond with a par value of $1,000 is currently selling for $1,025 from various securities dealers. The bond carries a 6 percent coupon rate with payments made annually. If purchased today and held to maturity, what is the exp..
Computation of Net Present Values and Internal Rate of Returns and Cross Over rates to select among mutually exclusive projects based on cash flows and discounting rates
lutz brewery brews three brands of beers lutz lager lutz light lutz ultralight. lager sells for 12 per barrel light
on september 4 2001 alabama power co. had two issues of ordinary preferred stock that traded on the nyse. one issue
youve purchased a car for 10000 and now are deciding whether to have a moonroof installed for 400 and a security
A $1,000 bond has a coupon rate of 10 percent and matures after 8 years. Interest rates are currently 7%.
1. suppose you have 250000 to invest. construct a diversified investment bportfolio in stock of six 6 companies traded
What are annual cash flows for the next five years? Hint: find CF0 to CF5
Ross have 918 shares of OJC. There are thirteen directors to be elected: 31,000 shares of common stock are outstanding. There is cumulative voting.
Suppose you are planning about purchasing a share of Kampfert Industries, which has a current market price of $31.60 per share. Kampfert's expects to pay a dividend of $2.37 per share next year.
By how much does the required rate of return on the riskier stock exceed the required return on the less risky stock?
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