Miami Publishing Company is beginning the process of calculating its weighted average cost of capital (WACC). Their
Question:
Miami Publishing Company is beginning the process of calculating its weighted average cost of capital (WACC). Their research has shown that they can raise capital under the following conditions:
1. Bonds can be sold with a par value of $1,000 and a coupon rate of 12% per year, paid semiannually. The bonds will be non-callable with 15 years to maturity. The current market price for identical bonds is $975.
2. Miami Publishing does not issue preferred stock.
3.Common stock could be sold. The most recent semiannual dividend paid by Miami was D0 = $3.75 per share. The company's dividends are expected to grow at a rate of 6% per year for the foreseeable future. The current price of Miami common stock is $175 per share.
Based on the information above, calculate the following:
A. the cost of debt from corporate bonds (Rd)
B. the cost of preferred stock (Rps)
C. the cost of common equity (Rce).
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter