kbland27
Sep 2, 2007, 07:10 PM
Type of financing Percentage of future financing
Bonds (8%,$1,000 par, 16 year maturity) 38%
Preferred stock (5,000 shares outstanding, 15%
$50 par, $1.50 dividend)
Common stock 47%
Total 100%
Flotation costa are (a) 15 percent of market value for new bond issue, (b) $1.21 per share for common stock, and (c) $2.01 per share for preferred stock. The dividends for common stock were $2.50 last year and are projected to have an annual growth rate of 6 percent. The firm is in a 34 percent tax bracket. What is the weighed average cost of capital if the firm finances are in the following proportions?
Market prices are $1,035 for bonds, $19 for preferred stock, and $35 for common stock. There will be sufficient internal common equity funding (i.e. retained earnings) available, such that the firm does not plan to issue new common stock.
Bonds (8%,$1,000 par, 16 year maturity) 38%
Preferred stock (5,000 shares outstanding, 15%
$50 par, $1.50 dividend)
Common stock 47%
Total 100%
Flotation costa are (a) 15 percent of market value for new bond issue, (b) $1.21 per share for common stock, and (c) $2.01 per share for preferred stock. The dividends for common stock were $2.50 last year and are projected to have an annual growth rate of 6 percent. The firm is in a 34 percent tax bracket. What is the weighed average cost of capital if the firm finances are in the following proportions?
Market prices are $1,035 for bonds, $19 for preferred stock, and $35 for common stock. There will be sufficient internal common equity funding (i.e. retained earnings) available, such that the firm does not plan to issue new common stock.