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Edit View History Bookmarks Window Help -> 2 < ezto.mheducation.com on Generator [Updated for 2024] Valuation, Cost of Capital and Capital Budgeting i Quiz: Valuation, Cost of Capital and Capital Budgeting M Sample Five-Year Marketing Plan for Paradise Kitchens... M Question 10-Quiz: Valuation, C Saved Help Save & Exit S 0 01:52:25 A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with a 9.7 percent coupon rate and another bond with an 7.3 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating are now selling to yield 10.6 percent. The common stock has a price of $51 and an expected dividend (D1) of $1.71 per share. The historical growth pattern (g) for dividends is as follows: Mc Graw Hill $1.26 1.40 1.55 1.71 The preferred stock is selling at $71 per share and pays a dividend of $6.70 per share. The corporate tax rate is 30 percent. The flotation cost is 3.0 percent of the selling price for preferred stock. The optimum capital structure for the firm is 25 percent debt, 20 percent preferred stock, and 55 percent common equity in the form of retained earnings. a. Compute the average historical growth rate. Note: Do not round intermediate calculations. Round your answer to the nearest whole percent and use this value as g. Input your answer as a whole percent. ! 1 Growth rate % b. Compute the cost of capital for the individual components in the capital structure. Note: Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places. F2 2 @ # 3 F3 300 80 Q W E A S D 3 2 $ 94 000 000 F4 % do5 < Prev 10 of 25 Next > APR 25 MacBook Air 5 tv A DII F5 F6 F7 F8 DD F9 96 R T Y LL G & 29 7 H U * 8 9 0 O wwwww J K L L Z X C V B N M F10 F11 P V + || { [ ? ezto.mheducation.com tor [Updated for 2024] Quiz: Valuation, Cost of Capital and Capital Budgeting M Sample Five-Year Marketing Plan for Paradise Kitchens... M Question 1 on, Cost of Capital and Capital Budgeting Saved Help b. Compute the cost of capital for the individual components in the capital structure. Note: Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Preferred stock Common equity Weighted Cost % c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Preferred stock Common equity Weighted average cost of capital Weighted Cost % 3 2 F1 F2 80 F3 000 F4 2 3 % $ % 4 5 < Prev APR 25 10 of 25 Next > MacBook Air Edit View History Bookmarks Window Help -> 2 < ezto.mheducation.com on Generator [Updated for 2024] Valuation, Cost of Capital and Capital Budgeting i Quiz: Valuation, Cost of Capital and Capital Budgeting M Sample Five-Year Marketing Plan for Paradise Kitchens... M Question 10-Quiz: Valuation, C Saved Help Save & Exit S 0 01:52:25 A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with a 9.7 percent coupon rate and another bond with an 7.3 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating are now selling to yield 10.6 percent. The common stock has a price of $51 and an expected dividend (D1) of $1.71 per share. The historical growth pattern (g) for dividends is as follows: Mc Graw Hill $1.26 1.40 1.55 1.71 The preferred stock is selling at $71 per share and pays a dividend of $6.70 per share. The corporate tax rate is 30 percent. The flotation cost is 3.0 percent of the selling price for preferred stock. The optimum capital structure for the firm is 25 percent debt, 20 percent preferred stock, and 55 percent common equity in the form of retained earnings. a. Compute the average historical growth rate. Note: Do not round intermediate calculations. Round your answer to the nearest whole percent and use this value as g. Input your answer as a whole percent. ! 1 Growth rate % b. Compute the cost of capital for the individual components in the capital structure. Note: Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places. F2 2 @ # 3 F3 300 80 Q W E A S D 3 2 $ 94 000 000 F4 % do5 < Prev 10 of 25 Next > APR 25 MacBook Air 5 tv A DII F5 F6 F7 F8 DD F9 96 R T Y LL G & 29 7 H U * 8 9 0 O wwwww J K L L Z X C V B N M F10 F11 P V + || { [ ? ezto.mheducation.com tor [Updated for 2024] Quiz: Valuation, Cost of Capital and Capital Budgeting M Sample Five-Year Marketing Plan for Paradise Kitchens... M Question 1 on, Cost of Capital and Capital Budgeting Saved Help b. Compute the cost of capital for the individual components in the capital structure. Note: Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Preferred stock Common equity Weighted Cost % c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Preferred stock Common equity Weighted average cost of capital Weighted Cost % 3 2 F1 F2 80 F3 000 F4 2 3 % $ % 4 5 < Prev APR 25 10 of 25 Next > MacBook Air