Financial Statement Information: Sales $1,000 Net Income $50 Total Assets $2,000 Shareholder equity $750 Tax rate 40%
Question:
Financial Statement Information:
Sales $1,000
Net Income $50
Total Assets $2,000
Shareholder equity $750
Tax rate 40%
Bond Issue: 1500,000 $1,000 par value 20-year 5% coupon bonds with semiannual payments with a yield to maturity of 7%.
100 million shares of stock outstanding
Market price per share $20
1 million shares of $8 per share dividend preferred stock
Market price per share of preferred stock $ 120
HSB's stock's beta 1.20
Risk free rate 3%
Market risk premium 6.5%
Recent dividend on common stock $2 per share
Expected growth rate in common stock dividends 6%
Calculate the percentage of debt in HSB's market value capital structure
Calculate the CAPM required return on HSB common stock
Assume flotation costs on HSB preferred stock are 7%. Calculate HSB preferred stock required return.