What are costs of the individual capital components

Assignment Help Financial Management

Reference no: EM131457770

BALANCE SHEET Cash 2,000,000 Accounts Payable and Accruals 18,000,000 Accounts Receivable 28,000,000 Notes Payable 40,000,000 Inventories 42,000,000 Long-Term Debt 60,000,000 Preferred Stock 10,000,000 Net Fixed Assets 133,000,000 Common Equity 77,000,000 Total Assets 205,000,000 Total Claims 205,000,000 Market Values of Capital

• The company has 60,000 bonds with a 30-year life outstanding, with 15 years until maturity. The bonds carry a 10 percent semi-annual coupon, and are currently selling for $874.78.

• You also have 100,000 shares of $100 par, 9% dividend perpetual preferred stock outstanding. The current market price is $90.00. Any new issues of preferred stock would incur a $3.00 per share flotation cost. • The company has 5 million shares of common stock outstanding with a currently price of $14.00 per share. The stock exhibits a constant growth rate of 10 percent. The last dividend (D0) was $.80. New stock could be sold with flotation costs, including market pressure, of 15 percent.

• The risk-free rate is currently 6 percent, and the rate of return on the stock market as a whole is 14 percent. Your stock’s beta is 1.22. • Your firm does not use notes payable for long-term financing.

• Your firm’s federal + state marginal tax rate is 40%.

Question:

What are the costs of the individual capital components? a. long-term debt (before & after tax) b. preferred stock c. average cost of retained earning (average of CAPM & DCF)

Reference no: EM131457770

Questions Cloud

What price do you expect mf shares to sell for in three year : What price do you expect MF shares to sell for in three years? what price will the stock sell? The market capitalization rate is 11%.

Market capitalization rate-calculate the growth rate : The market capitalization rate for Admiral Motors Company is 10%. Calculate the growth rate.

What is intrinsic value of deployment specialists stock : what is the intrinsic value of Deployment Specialists stock?

Planning construction of new loading ramp : Capital investment: Acme is planning construction of a new loading ramp for its single iron mill.

What are costs of the individual capital components : The company has 60,000 bonds with a 30-year life outstanding, with 15 years until maturity. What are the costs of the individual capital components?

Relationship between these international financial variables : What is the fundamental relationship between these international financial variables?

What is the value of investment at current interest rates : What is the value of the investment at the current interest rate of 12.75 percent?

What is present value of the second option : You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. What is the present value of the second option?

Average and weighted moving average for fourth year of sale : Using your business plan ( make up numbers) as an example, calculate both the 3- month moving average and weighted moving average for the fourth year of sales.

User Account

All Pages