Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last...

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Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last year. From those earnings, the company paid a dividend of $1.24 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 20% preferred stock, and 50% common stock. It is taxed at a rate of 21%. a. If the market price of the common stock is $43 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $7 per share, what is the company's cost of new common stock financing? c. The company can issue $1.62 dividend preferred stock for a market price of $34 per share. Flotation costs would amount to $2 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 11% annual coupon, 9-year bonds that can be sold for $1,180 each. Flotation costs would amount to $40 per bond. What is the after-tax cost of debt financing? e. What is the WACC? ... a. If the market price of the common stock is $43 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, the company's cost of retained earnings financing is %. (Round to two decimal places.) b. If underpricing and flotation costs on new shares of common stock amount to $7 per share, the company's cost of new common stock financing is two decimal places.) %. (Round to c. If the company can issue $1.62 dividend preferred stock for a market price of $34 per share, and flotation costs would amount to $2 per share, the cost of preferred stock financing is %. (Round to two decimal places.) d. If the company can issue $1,000-par-value, 11% coupon, 9-year bonds that can be sold for $1,180 each, and flotation costs would amount to $40 per bond, the after-tax cost of debt financing is %. (Round to two decimal places.) e. Using the cost of retained earnings, r,, the firm's WACC, ra, is %. (Round to two decimal places.) Using the cost of new common stock, r, the firm's WACC, ra is %. (Round to two decimal places.) Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last year. From those earnings, the company paid a dividend of $1.24 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 20% preferred stock, and 50% common stock. It is taxed at a rate of 21%. a. If the market price of the common stock is $43 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $7 per share, what is the company's cost of new common stock financing? c. The company can issue $1.62 dividend preferred stock for a market price of $34 per share. Flotation costs would amount to $2 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 11% annual coupon, 9-year bonds that can be sold for $1,180 each. Flotation costs would amount to $40 per bond. What is the after-tax cost of debt financing? e. What is the WACC? ... a. If the market price of the common stock is $43 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, the company's cost of retained earnings financing is %. (Round to two decimal places.) b. If underpricing and flotation costs on new shares of common stock amount to $7 per share, the company's cost of new common stock financing is two decimal places.) %. (Round to c. If the company can issue $1.62 dividend preferred stock for a market price of $34 per share, and flotation costs would amount to $2 per share, the cost of preferred stock financing is %. (Round to two decimal places.) d. If the company can issue $1,000-par-value, 11% coupon, 9-year bonds that can be sold for $1,180 each, and flotation costs would amount to $40 per bond, the after-tax cost of debt financing is %. (Round to two decimal places.) e. Using the cost of retained earnings, r,, the firm's WACC, ra, is %. (Round to two decimal places.) Using the cost of new common stock, r, the firm's WACC, ra is %. (Round to two decimal places.)

Answer rating: 100% (QA)

Answer a Cost of Retained Earnings Financing Given Market price of common stock 43 Dividends per share 124 growing at 9 per year Number of shares outs... View the full answer