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The target capital structure of Orange Corporation is 40 percent common stock, 10 percent preferred stock, and 50 percent debt.
Orange Corporation is issuing new common stock at a market price of $52. Dividends last year were $6.30 and are expected to grow at an annual rate of 6% forever. Flotation costs will be %5 per share.
Orange Corporation is issuing a bond. Before-tax cost of debt is 12.87%. The firm's tax rate is 34%.
The preferred stock of Orange Corporation sells for $49 and pays $4.90 in dividends. Flotation costs will be $5 per share.
a) What is Orange's cost of common equity?
b) What will be the Orange's after-tax cost of debt on the bond?
c) What is the Orange's cost of capital for the preferred stock?
d) What is the Orange's weighted average cost of capital?
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Preferred Products has issued preferred stock with an $8 yearly dividend that will be paid in perpetuity. Suppose the discount rate is 12%, at what price should the preferred sell?
Jane is planning investing in three different stocks or creating three distinct two-stock portfolios. Jane considers herself to be a rather conservative investor.
Assume Brown-Murphies faces a flotation cost of 14 percent on new equity issues.
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A venture capitalist wants to estimate value of a new venture. The venture is not expected to produce net income or earnings until the end of year five when the net income is estimated at $1,600,000.
A new machine can be purchased for $1,500,000. It will cost $45,000 to ship & $55,000 to fine tune the machine. The new machine will replace older version.
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