Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. xyz company has a target capital structure of 60%

XYZ Company has a target capital structure of 60% common stock, 30% debt, and 10%...

60.1K

Verified Solution

Question

Accounting

XYZ Company has a target capital structure of 60% common stock, 30% debt, and 10% preferred stock. The company wishes to issue new bond ($1,000 par value) with 10% coupon rate and 30 years to maturity. The flotation costs will be $20 and the bond has to be sold at 5% discount. To issue new preferred stock the company has to pay $2 as flotation cost. The market value of preferred stock is $8 and stock will pay $1 dividend. New common stocks will cost the company $2. The expected dividend is $3 and the market value is $19 and growth rate of 5%. Tax rate is 40%. What is the weighted average cost of capital?

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