What is the cost of capital using debentures

Reference no: EM131943288

Question: Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm's tax rate is 34%. The firm can issue the following securities to finance the investments:

Bonds: Mortgage bonds can be issued at a pre-tax cost of 9 percent. Debentures can be issued at a pre-tax cost of 10.5 percent.

Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $46. Flotation costs will be $3 per share. The recent common stock dividend was $3.60. Dividends are expected to grow at 6% in the future.

What is the cost of capital using debentures and external equity?

Reference no: EM131943288

Questions Cloud

Discuss the health or social implication of content of photo : Discuss health, healthcare, gender or social implications of content of photo. How could citizens and refugees help each other adjust to their new situation?

Development and performance management functions : Explain the impact an increase in diversity could have on the organization's training & development and performance management functions.

How much is the company net working capital : Bear Tracks, Inc., has current assets of $2, 300, net fixed assets of $10, 600, current liabilities of $1, 415, and long-term debt of $4, 110.

Office politics skills are important for a person : To what extent do you feel that office politics skills are important for a person who it technically competent and hardworking?

What is the cost of capital using debentures : Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm's tax rate is 34%. The firm can issue the following.

Explain the human resource management process : Summarize the conversation you would have with the employee's male co-worker, based on the concepts found in Chapter 2 of your textbook.

Compute becker brothers overall gain or loss : Becker Brothers is the managing underwriter for a 1.50-million-share issue by Jay's Hamburger Heaven. Becker Brothers is "handling" 11 percent of the issue.

Create an agile organization : Develop a 1000-1050 word essay (not counting the title or reference page in that count) that identifies specifically what the organization would look like.

How can i make my essay more organized and list two ideas : How can I make my essay more organized? List two ideas. Where can I add more content? List two ideas. Describe what you might add.

User Account

All Pages