HBM, Inc has the following capital structure: Assets $ 300,000 Debt $ 105,000 Preferred stock Common...
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HBM, Inc has the following capital structure: Assets $ 300,000 Debt $ 105,000 Preferred stock Common stock 15,000 180,000 The common stock is currently selling for $18 a share, pays a cash dividend of $0.60 per share, and is growing annually at 6 percent. The preferred stock pays a $5 cash dividend and currently sells for $90 a share. The debt pays interest of 9.0 percent annually, and the firm is in the 30 percent marginal tax bracket. a. What is the after-tax cost of debt? Round your answer to two decimal places. % b. What is the cost of preferred stock? Round your answer to two decimal places. % c. What is the cost of common stock? Assume that the current $0.60 dividend grows by 6 percent during the year. Round your answer to two decimal places. % d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places. % HBM, Inc has the following capital structure: Assets $ 300,000 Debt $ 105,000 Preferred stock Common stock 15,000 180,000 The common stock is currently selling for $18 a share, pays a cash dividend of $0.60 per share, and is growing annually at 6 percent. The preferred stock pays a $5 cash dividend and currently sells for $90 a share. The debt pays interest of 9.0 percent annually, and the firm is in the 30 percent marginal tax bracket. a. What is the after-tax cost of debt? Round your answer to two decimal places. % b. What is the cost of preferred stock? Round your answer to two decimal places. % c. What is the cost of common stock? Assume that the current $0.60 dividend grows by 6 percent during the year. Round your answer to two decimal places. % d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places. %
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To calculate the firms weightedaverage cost of capital WACC we need to find the cost of each component of capital debt preferred stock common stock an... View the full answer
Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Posted Date:
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