Bonds: Mortgage bonds can be issued at a pre-tax cost of 11 percent. Debentures can be...

 

 

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Bonds: Mortgage bonds can be issued at a pre-tax cost of 11 percent. Debentures can be issued at a pre-tax cost of 11.9 percent. Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $50. Flotation costs will be $3 per share. The recent common stock dividend was $4.06. Dividends are expected to grow at 7% in the future. What is the cost of capital using mortgage bonds and internal equity? Bonds: Mortgage bonds can be issued at a pre-tax cost of 11 percent. Debentures can be issued at a pre-tax cost of 11.9 percent. Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $50. Flotation costs will be $3 per share. The recent common stock dividend was $4.06. Dividends are expected to grow at 7% in the future. What is the cost of capital using mortgage bonds and internal equity?