Aaron 's Rentals has 45,000 shares of common stock outstanding at a market price of $27 a share The common stock just paid a $1 10 annual dividend and has a growth rate of 3 2 percent There are 10,000 shares of 5 5 percent preferred stock outstanding at a market price of $48 a share The preferred s...

a742 percent Calculation of firms weighted average cost of capital Cost ...

Aaron's Rentals has 45,000 shares of common stock outstanding at a market price of $27 a share.

Question:

Aaron's Rentals has 45,000 shares of outstanding at a market price of $27 a share. The just paid a $1.10 annual and has a growth rate of 3.2 percent. There are 10,000 shares of 5.5 percent preferred stock outstanding at a market price of $48 a share. The preferred stock has a of $100. The outstanding bonds mature in 11 years, have a total of $800,000, a per bond of $1,000, and a market price of $987.60 each. The bonds pay 7.5 percent interest, semiannually. The tax rate is 35 percent. What is the firm's weighted average cost of capital?
a. 7.42 percent
b. 7.61 percent
c. 8.97 percent
d. 9.42 percent
e. 10.38 percent

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...