Solution-What is the after-tax cost of debt

What is the after-tax cost of debt

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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.

What is the after-tax cost of debt? Round your answer to two decimal places.
What is the cost of preferred stock? Round your answer to two decimal places.
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.
What is the firm's weighted-average cost of capital? Round your answer to two decimal places.

Reference no: EM133058072

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What is the after-tax cost of debt

Reference no: EM133058072

Reference no: EM133058072

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