What is the cost of debt to the company

Assignment Help Finance Basics

Reference no: EM131959173

Question: A company plans to float $25 million in bonds and $10 million in preferred stock. The current price of it's preferred stock is $50 and it pays $2.60 in preferred dividends, which is likely to continue for the next five years. The company's investment banking firm will charge 5% in flotation fees to float these securities. The banking firm will sell the bonds with a 20-year maturity and a 6.5% annual coupon rate at par value. The company has a tax rate of 35%.

What is the cost of preferred stock and debt to the company after taxes,taking into account the flotation costs?

Reference no: EM131959173

Questions Cloud

Write a procedure that illustrates a recursive method : Write a procedure that illustrates a recursive method for filling a 4-connected area with an intensity specified in parameter fill up to a boundary color.

What is the molarity of concentrated nitric acid : 1000 mL of concentrated nitric acid (HNO3) solution has a density of 1.42 g/mL and is 71.0% HNO3 by mass. What is the molarity of concentrated nitric acid?

What is the post-ipo equity value : A company is planning to go public. Currently, the pre-IPO value of the firm's equity is $95 million, the number of outstanding shares is 3.5 million.

What neutral noble-gas atom : (a) What neutral noble-gas atom has the same electron configuration? (b) What is the monatomic ion with a 1- charge that has this configuration?

What is the cost of debt to the company : A company plans to float $25 million in bonds and $10 million in preferred stock. The current price of it's preferred stock is $50 and it pays $2.60.

Write a procedure to draw a line by dda algorithm : Write a procedure to draw a line by DDA algorithm. That procedure accept as input the endpoint pixel positions.

Execute the command in hex and print the command : For each of the following commands, first execute the command in hex and print the command and the result. Then execute it again in binary and print it.

Generate the current level of earnings per share : Your company's existing operations are expected to generate the current level of earnings per share in the future. Assume that the return on new investments.

Literature review on a company using accounting software : HI5019 STRATEGIC INFORMATION SYSTEMS T1 2018 - Describes and prepare a system flowchart of the sales procedures for the chosen organisation

User Account

All Pages