nterest rate Tax rate Dividend Common stock on the market Growth rate Debt ratio 9% 30% $2.50 $50 8% 40% a. Determine the firm's cost of capital. b. If the debt ratio rises to 50 percent and the cost of funds remains the same, what is the new cost of capital? c. If the debt ratio rises to 60 percent, the interest rate rises to 11 percent, the price of the stock falls to $35 and the company had to issue additional securities with flotation costs of 5%, what is the cost of capital? Why is this cost different?

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A: GAAP - Generally Accepted Accounting Principles

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Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.