Question: Bonds: Builtrite is planning on offering a $ 1 0 0 0 par value, 2 0 year, 6 % coupon bond with an expected selling

Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 6% coupon bond with an expected selling price of $1025. Flotation costs would be $55 per bond. Preferred Stock: Builtrite could sell a $46 par value preferred with a 6% coupon for $38 a share. Flotation costs would be $2 a share.
Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82 dividend. Dividends are expected to continue growing at 11%. Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings.
Assume a 25% tax bracket.
Their after-tax cost of internal common (retained earnings) is:
15.72%
16.05%
15.51%
16.58%
 Bonds: Builtrite is planning on offering a $1000 par value, 20

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!