(Individual or component costs of capital) Compute the cost of capital for the firm for the...
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(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 8.53 percent while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $1.08 dividend last year. The dividends are expected to grow at a rate of 4.8 percent per year into the foreseeable future. The price of this stock is now $24.97. c. A bond that has a $1,000 par value and a coupon interest rate of 11.9 percent with interest paid semiannually. A new issue would sell for $1,145 per bond and mature in 20 years. The firm's tax rate is 34 percent. d. A preferred stock paying a dividend of 6.1 percent on a $92 par value. If a new issue is offered, the shares would sell for $85.31 per share. a. The after-tax cost of debt debt for the firm is 5.62 %. (Round to two decimal places.) b. The cost of common equity for the firm is 9.33 %. (Round to two decimal places.) c. The after-tax cost of debt for the firm is %. (Round to two decimal places.) (Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 8.53 percent while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $1.08 dividend last year. The dividends are expected to grow at a rate of 4.8 percent per year into the foreseeable future. The price of this stock is now $24.97. c. A bond that has a $1,000 par value and a coupon interest rate of 11.9 percent with interest paid semiannually. A new issue would sell for $1,145 per bond and mature in 20 years. The firm's tax rate is 34 percent. d. A preferred stock paying a dividend of 6.1 percent on a $92 par value. If a new issue is offered, the shares would sell for $85.31 per share. a. The after-tax cost of debt debt for the firm is 5.62 %. (Round to two decimal places.) b. The cost of common equity for the firm is 9.33 %. (Round to two decimal places.) c. The after-tax cost of debt for the firm is %. (Round to two decimal places.)
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