# Question

HBM, Inc. has the following capital structure:

The common stock is currently selling for $15 a share, pays a cash dividend of $0.75 per share, and is growing annually at 6 percent. The preferred stock pays a $9 cash dividend and currently sells for $91 a share.

The debt pays interest of 8.5 percent annually, and the firm is in the 30 percent marginal tax bracket.

a. What is the after-tax cost of debt?

b. What is the cost of preferred stock?

c. What is the cost of common stock?

d. What is the firm’s weighted-average cost of capital?

The common stock is currently selling for $15 a share, pays a cash dividend of $0.75 per share, and is growing annually at 6 percent. The preferred stock pays a $9 cash dividend and currently sells for $91 a share.

The debt pays interest of 8.5 percent annually, and the firm is in the 30 percent marginal tax bracket.

a. What is the after-tax cost of debt?

b. What is the cost of preferred stock?

c. What is the cost of common stock?

d. What is the firm’s weighted-average cost of capital?

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