Southern Alliance Company needs to raise $45 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 65 percent common stock, 5 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 9 percent; for new preferred stock, 6 percent; and for new debt, 3 percent. What is the true initial cost figure Southern Alliance should use when evaluating its project?
Answer to relevant QuestionsThe Devon Co. just issued a dividend of $2.35 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $52 a share, what is the ...Stock in Country Road Industries has a beta of 0.85. The market risk premium is 8 percent, and T-bills are currently yielding 5 percent. The company’s most recent dividend was $1.60 per share, and dividends are expected to ...The following diagram shows the CARs for 386 oil exploration companies announcing oil discoveries between 1950 and 1980. Month 0 in the diagram is the announcement month. Assume that no other information is received and the ...For the company in problem 18.10, what is the value of being able to issue subsidized debt instead of having to issue debt at the terms it would normally receive? Assume the face amount and maturity of the debt issue are the ...The shareholders’ equity accounts or Hexagon International are shown here: Common stock ($1 book value)........ $ 30,000 Capital surplus................185,000 Retained earnings..............627,500 Total ...
Post your question