What is orange cost of common equity

Assignment Help Finance Basics
Reference no: EM13267471

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?

 

Reference no: EM13267471

Questions Cloud

How to calculate the ph of a buffer solution : Calculate the pH of a buffer solution obtained by dissolving 22.0 g of KH2PO4(s) and 40.0 g of Na2HPO4(s) in water and then diluting to 1.00 L
Estimate the wavelength of light : Two slits are separated by .1 mm. Planar light incident on them produces a diffraction pattern on a board 1.35 m away, estimate the wavelength of light
What is the percentage of distortion level at the frequency : The sampling frequency in a DSP system is fs = 8khz kHz. A hold circuit is used after the DAC device. What is the percentage of distortion level at the frequency f= 3.4 kHz
Express the concentration of an aqueous solution of fluoride : Express the concentration of a 0.0510 M aqueous solution of fluoride, F-, in mass percentage and in parts per million. Assume the density of the solution is 1.00 g/mL.
What is orange cost of common equity : The target capital structure of Orange Corporation is 40 percent common stock, 10 percent preferred stock, and 50 percent debt.
What rate of return would you have earned : If you sold the bond today, what rate of return would you have earned on your investment?
What is the depth of the water in the box : A hollow cubical box is 0.30 m on an edge. What is the depth of the water in the box just at the instant that water from the lake begins to pour into the box from the lake
What is the fair price for this stock : A stock expects to pay it's first ever dividend of $1 five years from today. From that point onward, dividends are expected to grow by 10% per year forever. What is the fair price for this stock if it has a required return of 14%?
Explain what maximum mass of nitrogen monoxide : If 750 grams of ammonia and 750 grams of oxygen gas were mixed, what maximum mass of nitrogen monoxide could be produced

Reviews

Write a Review

Finance Basics Questions & Answers

  Finance based decision making question

PH Toy Corporation is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $30 and PH Toy would sell it for $65

  Calculate preferred sell price

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?

  Calculate expected return and standard deviation

Jane is planning investing in three different stocks or creating three distinct two-stock portfolios. Jane considers herself to be a rather conservative investor.

  What will be the flotation-adjusted cost of equity

Assume Brown-Murphies faces a flotation cost of 14 percent on new equity issues.

  Bankruptcy-employee claims

Sonia, a book dealer, has following assets: a building worth $155,000, accounts receivable amounting to $32,500 due within the next three months, and $25,000 cash in the bank.

  Amortization affects the amount of interest expense

Determine the meaning of the following sentence: Amortization affects the amount of interest expense and explain how does amortization of premium affect the amount of interest expense?

  Computation of value of the and calculate for each bond

Computation of value of the bond and Calculate for each bond the percentage price change associated with a change of yield to maturity

  Calculate annually withdrawn amount

Today you begin your retirement. 30 years ago you deposited $50,000 into an investment account that, since then, has always paid a 6 APR compounded yearly.

  Compute net proceeds to the corporation

The Conely Company is about to go public. It currently has after tax earnings of $7,500,000, and 2,500,000 shares are owned through the present stockholders.

  Expected return on a portfolio

Determine the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio?

  Estimate value of a new venture

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.

  Find the initial outlay for capital budgeting

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.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd