JKS Manufacturing Company Limited typically pays floatation costs of 3% of the market price on all newly
Question:
JKS Manufacturing Company Limited typically pays floatation costs of 3% of the market price on all newly issued securities. The company currently has outstanding issues of the following securities:
Bonds 10% semi-annual coupon bonds with a par value of $1,000 per share. The bonds will mature in 10 years and are currently priced at $1,350 per bond. The amount of bonds outstanding is 30,000.
Preferred Stock One (1) million preferred shares outstanding with a market price of $10.00 per share. The preferred shares offer an annual dividend of $1.25 per share.
Common Stock Two (2) million shares of common stock outstanding with a price of $25.00 per share. Analysts estimate JKS' beta to be 0.85. The rate of return on a 6-month treasury bill is 2% and the market return is 9%.
If the firm is subject to a 30 percent marginal tax rate, please calculate the following:
a) The firm's cost of debt
b) The firm's cost of preferred stock
c) The firm's cost of common stock
d) The market value weights of each component of capital
e) The firms weighted average cost of capital (WACC)
f) Identify and briefly describe at least four (4) sources of financing available to a company
g) Provide a brief description of the Weighted Average Cost of Capital and its uses.
Expert Answer:
a Cost of debt Yield to maturity Bond yield 1 Tax rate 10 1 03 10 07 7 b Cost of pre... View the full answer
