The Blossom Products Co. currently has debt with a market value of $250 million outstanding. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The Blossom Products Co. currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) that have a maturity of 15 years and are currently priced at $1,418.61 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $11.00 per share. The preferred shares pay an annual dividend of $1.20. Blossom also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 6 percent per year forever. If Blossom is subject to a 28 percent marginal tax rate. Calculate the weights for debt, common equity, and preferred equity. (Round final answers to 4 decimal places, e.g. 1.2514.) Debt Preferred equity Common equity Cullumber Wok Co. is expected to pay a dividend of $2.5 one year from today on its common shares. That dividend is expected to increase by 8 percent every year thereafter. If the price of Cullumber common stock is $20.00, what is the cost of its common equity capital? (Round intermediate calculations to 2 decimal places, e.g. 0.15 and final answer to 1 decimal place, e.g. 15.2%.) Cost of common equity % The Blossom Products Co. currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) that have a maturity of 15 years and are currently priced at $1,418.61 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $11.00 per share. The preferred shares pay an annual dividend of $1.20. Blossom also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 6 percent per year forever. If Blossom is subject to a 28 percent marginal tax rate. Calculate the weights for debt, common equity, and preferred equity. (Round final answers to 4 decimal places, e.g. 1.2514.) Debt Preferred equity Common equity Cullumber Wok Co. is expected to pay a dividend of $2.5 one year from today on its common shares. That dividend is expected to increase by 8 percent every year thereafter. If the price of Cullumber common stock is $20.00, what is the cost of its common equity capital? (Round intermediate calculations to 2 decimal places, e.g. 0.15 and final answer to 1 decimal place, e.g. 15.2%.) Cost of common equity %
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
A question on the General Social Survey was: "About how many times did you engage in intercourse during the month?" This was only asked of people who affirmatively indicated that they have engaged in...
-
Calculate the following ratios for both 2021 and 2020 years: current ratio, quick ratio, debt to equity ratio, debt ratio, gross profit ratio, net profit ratio, return on equity, return on total...
-
How is book value calculated, and what does it represent?
-
A calculated estimate of the mean capacity of 120 refrigerators stored at a warehouse is 348 litres. The capacities are given in the following table. A delivery of n new refrigerators, all with...
-
Which of the following is true? a. ERS systems use disbursement vouchers. b. Setting up petty cash as an imprest fund violates segregation of duties. c. The EOQ formula is used to identify the...
-
A minibar in a hotel room generally provides an impression that the hotel is more upscale. PKF Hospitality research reported that minibars provide a mean annual revenue of $368 per hotel room (USA...
-
You have been given the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession . 1 5 . 0 4 . 1 7 Normal . 5 5 . 0 9 . 1 2...
-
A commoditys spot price as of December 31 is $46/unit, and storage costs are $0.84/unit at the end of every month l, starting January 31. if the effective monthly interest rate is .9% (compounded...
-
Explain the term capital investment . How do companies evaluate capital investments?
-
The term fact-bound typically refers to a situation or legal case where the outcome depends heavily on specific, detailed facts and circumstances unique to that case. In legal contexts, it means that...
-
In the ballistic pendulum experiment (A.K.A conservation of momentum & energy), the velocity of the projectile was measured and recorded (vo = 6 m/s). The mass of the projectile was 20 g and the...
-
Assume you have a portfolio worth currently $5,000,000. Let portfolio beta be p = 2. Assume you want to hedge market risk until 3 months from now. Current value of S&P500 index futures 3 month from...
-
Global Eagle is evaluating a project with the following cash flows: Initial cash outflow at t=0 is -$350, while cash inflow at t=1 is $14, at t=2 is $52, at t=3 is $106, at t=4 is $193, and at t=5 is...
-
On March 2, Sunland Company sold $997,000 of merchandise on account to Culver Company, terms 3/10, n/30. The cost of the merchandise sold was $583,000. (Credit account titles are automatically...
-
Answer the following two independent questions. a. MM Corporation is considering several proposed investments for the coming budget year. MM produces electrical apparatus for industrial complexes....
-
Three years ago, Girston Gravel Pit purchased a material conveyor system. The company has decided to sell the system and acquire more advanced technology. Data relating to the existing system follow....
-
You have just purchased a new car, making a down payment of \(\$ 8,000\) and financing the balance of the purchase cost on an installment credit plan. According to the credit agreement, you will pay...
-
Although they should be considered independently, investing and financing decisions are often considered together. Consider the case of a consumer acquiring a new car. The consumer can purchase a car...
Study smarter with the SolutionInn App