Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. assume that the company has the following capital

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...

60.1K

Verified Solution

Question

Finance

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:

  1. 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%)

  1. Preferred stock:

Face value of $35 that pays dividend$5 and floatation cost of $2

  1. Common stock:

Market value of $54 with floatationcost of $3.5. Last dividend was $6. The dividend will expect togrow at 7%.

Answer & Explanation Solved by verified expert
3.5 Ratings (259 Votes)
Please refer to below spreadsheet for    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

What is the payout policy of a company who is paying no dividends for the last...

Electrical Engineering
1.2K views

In Taiwan, no one goes to work, and everyone consumes a single good (food), which is...

Finance
1.2K views

General Electric Co. inked the first deal to move itself away from banking -- by selling...

Accounting
1.2K views

Mermaid LTD's long term debt agreements make certain demands on the business. For example, Mermaid may...

Basic Math
1.2K views

Indicates that information is imperative to economic growth Which of the following best completes the...

Statistics
1.2K views

E Quiz MATH 0314 Chapter 3 Mastery Quiz

Calculus
1.2K views

I 8 A vector 20 inches in length forms angles of 58 and 22 with...

Algebra
1.2K views

Fill in the blank Real numbers that can be represented with a terminating or repeating...

Accounting
1.2K views

At the end of 2015, Payne Industries had a deferred tax asset account with a...

Accounting
1.2K views

Marion, Inc. tiene 5,000 acciones del 5%, valor nominal de $100, acciones preferentes no acumulativas...

Accounting
1.2K views

QUESTION 29 Top-down budgeting is: a. when the local managers impose a budget on the...

Accounting
1.2K views

7a-9 Thank you for your help. 7A-9. Assume that the inventory records of SOUND...