What is patagonia cost of capital

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Patagonia, Inc. is considering new investment scheme.

Patagonia expects to be able to issue new debt at par with a coupon rate of 8%. The company also plans to issue new preferred stock with a $2.50 per share dividend at $25 a share. The current share price of Patagonia is $20.00. Patagonia expects to pay a dividend of $1.50 per share next year. Market analysts are forecasting dividend growth of 5%. Marginal tax rate is 35%.

A. Estimate cost of equity capital, cost of preferred stock and cost of debt capital?

B. If Patagonia raises capital using 45% debt, 5% preferred stock, and 50% common stock, what is Patagonia's cost of capital?

C. If Patagonia raises capital using 30% debt, 5% preferred stock, and 65% common stock, what is Patagonia's cost of capital?

Reference no: EM132820120

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