Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this compute the cost of capital for the
a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.4 percent mat is paud semiannually. The bond is currently selling for a price of $1,121 and will mature in 10 years
The firm's tax rate is 34 percent
b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company?
A new common stock issue that paid a $174 dividend last year. The par value of the stock is $15, and the firm's dividends per share have grown at a rate of 81 percent per year. This growth rate is expected
to continue into the foreseeable tuture The pnce of this stock is now $27 12
d. A preferred stock paying a 10.7 percent dividend on a $126 par value The preferred shares are currently selling for $151.04
A bond selling to yield 13 5 percent for the purchaser of the bond The borrowing firm faces a tax rate of 34 percent
a. The after-tax cost of debt from the firm is (Round to two decimal places)
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