Fallax Corp. common stock is currently priced at $43.50 per share in the open market. Analysts...

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Fallax Corp. common stock is currently priced at $43.50 per share in the open market. Analysts expect Fallax to offer $1.75 per share in dividends at the end of next year, which is projected to grow at 5.2% indefinitely. What is Fallax's cost of internal common equity? 2. Wellstock Corp. will issue new common stock. The company's existing common stock is selling for $26.50 per share and offered $2.25 per share in dividends at the end of last year. Dividends are expected to grow at an annual rate of 6% indefinitely. New issues of common stock will incur 8% of the current market price. What is the cost of the company's new common stock? 3. Deolity Inc. is raising funds for a new project with $6 million in bonds, $4 million in preferred stock, and $10 million in retained earnings. The corporation's after-tax cost of debt is 9%, cost of preferred stock is 15%, and cost of retained earnings is 21%. What is the firm's WACC? 4. Monted Inc. $1,000 par value corporate bonds mature in 12 years and sell in the market for $940. The bonds offer a coupon rate of 5%, paid semiannually. Flotation costs on newly issued bonds are $50 per bond. The corporation is in the 35% tax bracket. What is the company's pre-tax cost of debt on the newly issued bonds? 5. Ezally Corp. is investing in a new machine that will be financed by issuing new 25-year, $1,000 par, 6% semiannual coupon bonds. The bonds are currently selling in the market for $980. Flotation costs on newly issued bonds are $80. The corporation's marginal tax rate is 35%. What is the post-tax cost of debt for the newly-issued bonds? 6. Loorious Corp. wants to raise new common stock to finance an expansion. The corporation's existing common stock just paid a $12.50 per share dividend, which is expected to grow at a constant rate of 3% indefinitely. The stock currently sells for $85.00. Flotation expenses of 12% of the selling price will be incurred on any new shares issued. What is the corporation's cost of new common stock? 7. Solery Corp. common stock is currently selling for $26.75 per share. The stock recently paid a dividend of $1.25 per share. Dividends are expected to grow at a constant annual rate of 3% in the foreseeable future. The corporation would like to use retained earnings to finance a new project. What is the corporation's cost of internal equity? Fallax Corp. common stock is currently priced at $43.50 per share in the open market. Analysts expect Fallax to offer $1.75 per share in dividends at the end of next year, which is projected to grow at 5.2% indefinitely. What is Fallax's cost of internal common equity? 2. Wellstock Corp. will issue new common stock. The company's existing common stock is selling for $26.50 per share and offered $2.25 per share in dividends at the end of last year. Dividends are expected to grow at an annual rate of 6% indefinitely. New issues of common stock will incur 8% of the current market price. What is the cost of the company's new common stock? 3. Deolity Inc. is raising funds for a new project with $6 million in bonds, $4 million in preferred stock, and $10 million in retained earnings. The corporation's after-tax cost of debt is 9%, cost of preferred stock is 15%, and cost of retained earnings is 21%. What is the firm's WACC? 4. Monted Inc. $1,000 par value corporate bonds mature in 12 years and sell in the market for $940. The bonds offer a coupon rate of 5%, paid semiannually. Flotation costs on newly issued bonds are $50 per bond. The corporation is in the 35% tax bracket. What is the company's pre-tax cost of debt on the newly issued bonds? 5. Ezally Corp. is investing in a new machine that will be financed by issuing new 25-year, $1,000 par, 6% semiannual coupon bonds. The bonds are currently selling in the market for $980. Flotation costs on newly issued bonds are $80. The corporation's marginal tax rate is 35%. What is the post-tax cost of debt for the newly-issued bonds? 6. Loorious Corp. wants to raise new common stock to finance an expansion. The corporation's existing common stock just paid a $12.50 per share dividend, which is expected to grow at a constant rate of 3% indefinitely. The stock currently sells for $85.00. Flotation expenses of 12% of the selling price will be incurred on any new shares issued. What is the corporation's cost of new common stock? 7. Solery Corp. common stock is currently selling for $26.75 per share. The stock recently paid a dividend of $1.25 per share. Dividends are expected to grow at a constant annual rate of 3% in the foreseeable future. The corporation would like to use retained earnings to finance a new project. What is the corporation's cost of internal equity?

Answer rating: 100% (QA)

SOLUTION 1 To calculate the cost of internal common equity we can use the Gordon Growth Model formula Cost of Internal Common Equity Expected Dividend Current Stock Price Expected Dividend Growth Rate ... View the full answer