Given the following information: interest rate 8% tax rate 30% dividend $1 common stock price $50 dividend
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Question:
Given the following information: interest rate 8% tax rate 30% dividend $1 common stock price $50 dividend growth rate 7% debt ratio 40%
a. Determine the company's cost of capital.
b. If the debt ratio increases to 50 percent and the cost of funds remains the same, what is the new cost of capital?
C. If the debt ratio rises to 60 percent, the interest rate rises to 9 percent, and the stock price falls to $30, what is the cost of capital?
d. Why is this cost different?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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