Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. lexington corporation has a capital structure of 4

Lexington Corporation has a capital structure of 40% debt and 60% common equity. This capital...

50.1K

Verified Solution

Question

Finance

image
Lexington Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments: Debt: Capital can be raised through bank loans at a pretax cost of 6.5%. Also, bonds can be issued at a pretax cost of 5.7%. Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $95. Flotation costs will be $5 per share. The recent common stock dividend was $4.17. Dividends are expected to grow at 7% in the future. What is the cost of capital if the firm uses bonds and issues new common stock? SET YOUR CALCULATOR TO 4 DECIMAL PLACES. PLEASE INPUT THE ANSWER IN PERCENT ROUNDING IT TO 2 DECIMALS AT THE END. DO NOT INCLUDE % SIGN, E.G., INSTEAD OF 9.9922%, FOR EXAMPLE, ENTER 9.99

Answer & Explanation Solved by verified expert
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

Biology
1.2K views

Hooke's law is described mathematically using the formula Fsp = -kx. Which statement is correct...

Medical Sciences
1.2K views

Discuss the A&P of the urinary bladder and include one usual abnormal finding

Physics
1.2K views

During a relay race, you run the first leg of the race, a distance of 1.8...

Biology
1.2K views

This structure is the O Thalamus O Corpus callosum O Pineal gland O Pituitary gland...

Biology
1.2K views

In humans birth tends to be difficult Babies need to grow as large of a...

Physics
1.2K views

20 Four point charges q 6 C q 8 C ac 6 C and q...

Geometry
1.2K views

Geometry is gal,'s is correctly spelled plural noun

Basic Math
1.2K views

The number of elements in each region are shown in the Venn diagram to the...

Accounting
1.2K views

Help me 1) Which of the following is true about payment systems as bank-owned...

Accounting
1.2K views

Selected financial statement information and additional data for Johnston Enterprises is presented below. Prepare a...

Accounting
1.2K views

Leadership Subject Referring to Donald Trump, the president of the USA, answer the question below...

Accounting
1.2K views

If someone could help solve 4 and 5 :) MASTER BUDGET FACTS AND FIGURES:...