Question: Stackpool Inc has the following capital structure and is considered to be an optimum. The company has paid a dividend of $2.36 with a growth

Stackpool Inc has the following capital structure and is considered to be an optimum. The company has paid a dividend of $2.36 with a growth rate of 10%. The company's share has a current market price of $23.60 per share. The expected dividend per share next year is 50% of the dividend for the current year. The 16% new debentures can be issued by the company. The company's debentures are currently selling at $96 per debenture. The new 11% preference share can be sold at a net price of $9.15 (face value $10 each). The company's tax rate is 30%

a. Calculate the after tax cost of new debt

b. Calculate the after tax cost of new preference capital

c. Calculate the after tax cost of new Equity capital

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!