A company has a tax rate of 28 % and currently its semi-annual bonds are...
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A company has a tax rate of 28 % and currently its semi-annual bonds are priced at $882.50. These bonds will mature in 15 years and are paying an 8.725% coupon. The company preferred stock was issued at $100 par and pays an 8.35% dividend once a year. Its perpetuity price is $122.00. The firm expects it will have to issue new stock to support expansion. Flotation costs will be approximately 12.5%. Currently the risk-free rate is 2.25%, the bond-yield- risk premium is 4%, and the market risk premium is 3.75%. The board of directors wishes to maintain target weights of 35% debt, 10% preferred stock and 55% common equity. The most recent regression analysisshowed a beta of 1.2. Common stock trades at $22.00 per share, and the most recent dividend was $1.10. Growth of 4.5% is considered to continue for the foreseeable future.
Semi annual yield
Cost of lt debt
Pefereed stock div
Cost o pref stock
Cost of new equity
WACC
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