Test Developer, Inc. (TDI) is raising new capital by using preferred stock. Its investment bankers have estimated that if the company pays a dividend of $9 per share on the new preferred stock, it can sell new preferred stock at $90 per share. They have estimated that the cost of selling the new preferred stock will be $2.40 per share. What is the companys after-tax cost of preferred stock for this new financing if its tax rate is 30 percent?Long-term Borrowing Company (LBC) is raising new capital by selling bonds. Its investment bankers have estimated that if the company sets the coupon rate for the new bonds at 8% paid semiannually, it can sell them in the market for $1,102 per bond. The new bonds will have 15 years to maturity. The bankers have estimated that the cost of selling the new bonds will be $25 per bond. What is the companys after-tax cost of new debt for this new financing if its tax rate is 30 percent?

Answer rating: 100% (QA)

To calculate the aftertax cost of preferred stock for Test Developer Inc TDI Dividend per share 9 Pr... View the full answer