Question: I WILL LIKE FOR FAST REPLY Niagara Inc. has 5,000,000 shares of common stock outstanding, 1,000,000 of preferred stock outstanding, and 200,000 bonds outstanding with
Niagara Inc. has 5,000,000 shares of common stock outstanding, 1,000,000 of preferred stock outstanding, and 200,000 bonds outstanding with a par value of $1,000. The common stock currently sells for $25, and has a beta of 1.5. The preferred stock currently sells for $30 per share and pays $5 dividend. The bonds have 9% coupon rate and make semiannual coupon payments. The bonds have 25 years to maturity and currently are selling at $763.57. The risk-free rate is 5% and the expected return on the market is 12%. Niagara's tax rate is 40%. A. Estimate the cost of common stock. (3 marks) B. Estimate the cost of preferred stock. (3 marks) C. Estimate the after-tax cost of debt. (3 marks) D. Estimate the weighted average cost of capital for Niagara Inc. (4 marks) E. Niagara Inc. needs $8,000,000 to start a new project. Floatation costs for issuing new common stock - 12 percent, for new preferred stock - 8 percent, and for new debt - 4 percent. Assuming that Niagara Inc. maintains the same capital structure, how much does it need to raise
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