User Account

All Pages

What is the after-tax cost of debt

Assignment Help Finance Basics
Reference no: EM133058072

HBM, Inc has the following capital structure:

Assets $

500,000 

Debt$

150,000

 

 

Preferred stock

50,000

 

Common stock

300,000

The common stock is currently selling for $16 a share, pays a cash dividend of $0.90 per share, and is growing annually at 3 percent. The preferred stock pays a $5 cash dividend and currently sells for $86 a share. The debt pays interest of 8.5 percent annually, and the firm is in the 30 percent marginal tax bracket.

  1. What is the after-tax cost of debt? Round your answer to two decimal places.
  2. What is the cost of preferred stock? Round your answer to two decimal places.
  3. What is the cost of common stock? Assume that the current $0.90 dividend grows by 3 percent during the year. Round your answer to two decimal places.
  4. What is the firm's weighted-average cost of capital? Round your answer to two decimal places.

Reference no: EM133058072

Questions Cloud

What is the bond price : Assume a bond matures in 6 years with a par value of $1,000, and annual coupon payment of $80, as well as a market interest rate of 9%. What is the bond's price
Determine the bond current value : An organization's bond has a yield to maturity of 3.34 percent, a coupon rate of 5 percent, and 38 years to maturity. Determine the bond current value
Animal industry in united states and foreign country : Identify and compare an incident (naturally occurring or intentional) affecting either the plant or animal industry in the United States and a foreign country.
Cashflows for the leasee : You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment)
What is the after-tax cost of debt : The common stock is currently selling for $16 a share, pays a cash dividend of $0.90 per share, and is growing annually at 3 percent. The preferred stock pays a
Journalize entries to apply factory overhead to production : Journalize the entries to apply factory overhead to production in each factory for August. If an amount box does not require an entry, leave it blank
Assessing the challenges facing malawis micro : Dissertation on Assessing the Challenges Facing Malawi's Micro, Small, and Medium Enterprises: The Case of Blantyre city
Difference affects the values of firm a and b : Firm A and firm B are identical in business model, financial performance, risk management, etc. Analysts believe that firm A and B have similar expected future
How much is the interest expense : On January 1, 20x1 RUIN Co. acquired land by issuing a three-year, 12%, P4,000,000 note payable. How much is the interest expense in 20x2

Reviews

Write a Review

Finance Basics Questions & Answers

  Generate a set of appropriate dimensionless groups

By dimensional analysis, generate a set of appropriate dimensionless groups.

  Write a letter to refuse a favor for a colleague’s son

Write a letter to Dr. Mazzi explaining why you are unable to provide a summer internship to her son Peter.

  Required rate of return

AA Corporation's stock has a beta of 0.4. The risk-free rate is 3%, and the expected return on the market is 9%. What is the required rate of return on AA's sto

  How much would you be willing to pay for the stock today

The last dividend paid was $0.50 per share. The required rate of return for the stock is 20 percent. How much would you be willing to pay for the stock today?

  What is the net present value of project in given situation

A project will produce after-tax operating cash flows of $45,000 a year for four years. During the life of the project, net working capital will be reduced.

  What should be the price of stock

The discount rate for Philip Morris stock is 16%. What should be the price of this stock? Please provide answer and formula

  Which measure should you use to choose between the projects

Consider the following two projects: Cash flows Project A Project BCCCCC a.b.c.d.e. f.g.h-1.h-2.h-3.

  Why are cash flows that are connected to common stock

Why are cash flows that are connected to common stock difficult to estimate? How does this compare to those related to bonds.

  Find npv, irr and mirr for the project

The project would cost the firm $145,000. If the firm's cost of capital is 11%, find NPV, IRR and MIRR for the project. Do you accept this project? Why?

  Explain residual income and what residual income represent

Explain residual income. What does residual income represent? What does residual income measure? If a firm's residual income for a particular year is positive, does that mean the firm was profitable?

  How is consumer debt different today than in the past

How is consumer debt different today than in the past? - What role do interest rates play in mounting consumer debt?

  Find the firm marginal cost of capital

Marginal Incorporated (MI) has determined that its after-tax cost of debt is 9.0%. Its cost of preferred stock is 13.0%. Its cost of internal equity is 17.0%.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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