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July 30, 2014

Homework Help: fin 370

Posted by chris on Tuesday, September 17, 2013 at 7:13pm.

(individual or component costs of capital)Compute the cost of the capital for the firm for the following:?
a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.7%. The bonds have a current market value of $1,125 and will mature in 10 years. The firms marginal tax rate is 34%.

b. A new common stock issue that paid a $1.76 dividend last year. The firms dividends are expected to continue to grow at 6.2% per year forever. The price of the firmís common stock is now %27.39.

c. A preferred stock paying 8.6% dividend on a $112 par value.

d. A bond selling to yield 12.4% where the firmís tax rate is 34%.

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