Assume the following capital structure for Al Amal Company: Bonds $ 10000000 Preferred stock $2500000 Common...
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Assume the following capital structure for Al Amal Company: Bonds $ 10000000 Preferred stock $2500000 Common stock $10000000 Retained earnings $2500000. 1- Company's bonds of $ 1000 at 12% interest rate with 7 years maturity are currently selling for $800 (proceeds), company's tax rate is 40%. Calculate after tax cost of bonds. (10 marks) 2- Company's common stock is selling for $50, last year's dividend was $4.8 per share, and dividends growth rate is 6%. Calculate cost of common stock. (5 marks) 3- Company's preferred stock is paying a dividend of $5 per share and selling for $23 per share. 3- Company's preferred stock is paying a dividend of $5 per share and selling for $23 per share. Calculate cost of preferred stock. (5 marks) EXAMINATION QUESTION BOOKLET 4- Calculate the weighted average cost of capital for Al Amal Company. (10 marks). Page 2 of 4 DIN: RUW-SNT-T-035 RN: 04 ED: 18/02/2016 Assume the following capital structure for Al Amal Company: Bonds $ 10000000 Preferred stock $2500000 Common stock $10000000 Retained earnings $2500000. 1- Company's bonds of $ 1000 at 12% interest rate with 7 years maturity are currently selling for $800 (proceeds), company's tax rate is 40%. Calculate after tax cost of bonds. (10 marks) 2- Company's common stock is selling for $50, last year's dividend was $4.8 per share, and dividends growth rate is 6%. Calculate cost of common stock. (5 marks) 3- Company's preferred stock is paying a dividend of $5 per share and selling for $23 per share. 3- Company's preferred stock is paying a dividend of $5 per share and selling for $23 per share. Calculate cost of preferred stock. (5 marks) EXAMINATION QUESTION BOOKLET 4- Calculate the weighted average cost of capital for Al Amal Company. (10 marks). Page 2 of 4 DIN: RUW-SNT-T-035 RN: 04 ED: 18/02/2016
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Related Book For
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
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