Assume that the company has the following capital structure:
Debt | $15,000,000 |
Preferred stock | $7,500,000 |
Common stock | $27,500,000 |
What will be the cost of capital ifthe company decide to raise the needed capital proportionally andwith following costs? Please use the following information tocalculate the weighted cost of capital:
- Bond:
A 30-year bond with a face value of$1000 and coupon interest rate of 13% and floatation cost of $20(Tax is 35%)
- Preferred stock:
Face value of $35 that pays dividend$5 and floatation cost of $2
- Common stock:
Market value of $54 with floatationcost of $3.5. Last dividend was $6. The dividend will expect togrow at 7%.
