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  3. explain and calculate the costs of different capit

Explain and calculate the costs of different capital components—debt, preferred stock, retained earnings, and common stock.

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Finance

  • Explain and calculate the costs of different capitalcomponents—debt, preferred stock, retained earnings, and commonstock.

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Calculation of the cost of debt Suppose a bond with face value of 1000 is selling at a price of 850 The coupon rate is 8 and the time to maturity is 8 years The tax rate is 25 So we can calculate the cost of debt IY as FV 1000 PV    See Answer
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