Honest Corp. wants to calculate its weighted average cost of capital (WACC). Its stock sells for...

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Honest Corp. wants to calculate its weighted average cost of capital (WACC). Its stock sells for $50, and the most recent dividend was $2.10. Vast majority of security analysts are projecting that the common dividend will grow at a rate of 7% a year. A flotation cost of 10% would be required to issue new common stock. For the own-bond-yield-plus-judemental-risk-premuim approach, the firms doesn't provide relevant data. Honest's preferred stock pays a dividend of $3.30 per share, and new preferred stock could be sold at a price of $30 per share. Honest will incur flotation costs equals to 5% of the proceeds on a new issue of preferred stocks. The current price of Honest's 12% coupon, semi-annual payment, noncallable bonds with 15-year bond issued 3 years ago is $1,153.72. Honest doesn't not use short-term debt on a permanent basis. New bond would be privately placed with no flotation cost. The market risk premium is 6%, the risk-free rate is 6.5%, and its beta is 0.83. The marginal tax rate is esimated at 35%. In its target cost of capital structure is 40% debt, 10% preferred stock, and 50% common equity. Every questions should be answers after tax/costs basis. a. b. C. d. What is the company's after-tax cost of debt? What is the company's cost of preferred stock? What is the company's common stock? What is the company's weighted average of cost capital? Show your work below. Type the final answers for a HERE Type the final answers for b HERE Type the final answers for c HERE Type the final answers for d HERE Honest Corp. wants to calculate its weighted average cost of capital (WACC). Its stock sells for $50, and the most recent dividend was $2.10. Vast majority of security analysts are projecting that the common dividend will grow at a rate of 7% a year. A flotation cost of 10% would be required to issue new common stock. For the own-bond-yield-plus-judemental-risk-premuim approach, the firms doesn't provide relevant data. Honest's preferred stock pays a dividend of $3.30 per share, and new preferred stock could be sold at a price of $30 per share. Honest will incur flotation costs equals to 5% of the proceeds on a new issue of preferred stocks. The current price of Honest's 12% coupon, semi-annual payment, noncallable bonds with 15-year bond issued 3 years ago is $1,153.72. Honest doesn't not use short-term debt on a permanent basis. New bond would be privately placed with no flotation cost. The market risk premium is 6%, the risk-free rate is 6.5%, and its beta is 0.83. The marginal tax rate is esimated at 35%. In its target cost of capital structure is 40% debt, 10% preferred stock, and 50% common equity. Every questions should be answers after tax/costs basis. a. b. C. d. What is the company's after-tax cost of debt? What is the company's cost of preferred stock? What is the company's common stock? What is the company's weighted average of cost capital? Show your work below. Type the final answers for a HERE Type the final answers for b HERE Type the final answers for c HERE Type the final answers for d HERE

Answer rating: 100% (QA)

Lets calculate each component step by step a Aftertax Cost of Debt Rd The current price of the 12 co... View the full answer