1. Calculate the cost of each financing source for Keyboard, Inc. The tax rate is 40%:...

 

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1. Calculate the cost of each financing source for Keyboard, Inc. The tax rate is 40%: Financial Source Twelve-year bond, 6.75% annual coupon, current price of $960.81. Dividend $5.50, current price of $63.75 Beta of 1.45, excess market return of 5.63%, risk-free rate of 6.05% Debt Preferred Stock Common Stock Cost a. Currently, there are 121 million shares of common stock outstanding at $48 per share and four million shares of preferred stock outstanding. In addition, there is currently $956 million of debt outstanding. Calculate the weighted average cost of capital using current market weights. b. The company is targeting a capital structure of 25% debt, 5% preferred stock, and 70% common equity. Recalculate the cost of capital based on target weights. Compare your answer to part B. 1. Calculate the cost of each financing source for Keyboard, Inc. The tax rate is 40%: Financial Source Twelve-year bond, 6.75% annual coupon, current price of $960.81. Dividend $5.50, current price of $63.75 Beta of 1.45, excess market return of 5.63%, risk-free rate of 6.05% Debt Preferred Stock Common Stock Cost a. Currently, there are 121 million shares of common stock outstanding at $48 per share and four million shares of preferred stock outstanding. In addition, there is currently $956 million of debt outstanding. Calculate the weighted average cost of capital using current market weights. b. The company is targeting a capital structure of 25% debt, 5% preferred stock, and 70% common equity. Recalculate the cost of capital based on target weights. Compare your answer to part B.

Answer rating: 100% (QA)

To calculate the cost of each financing source for Keyboard Inc well use the given information and formulas a Weighted Average Cost of Capital WACC us... View the full answer