Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Question
Chapter 9, Problem 2SP
a)
Summary Introduction
To determine: The after tax cost of debt.
b)
Summary Introduction
To determine: The cost of 30% dividend paying stock.
c)
Summary Introduction
To determine: The cost of $3.50dividend paying stock with a market price of $43.
d)
Summary Introduction
To determine: The cost of
Summary Introduction
To determine: The after tax cost of debt.
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(Individual or component costs of capital) Compute the cost of 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 10.1 percent. Interest payments are $50.50 and are paid semiannually. The bonds have a current
market value of $1,122 and will mature in 10 years. The firm's marginal tax rate is 34 percet.
b. A new common stock issue that paid a $1.85 dividend last year. The firm's dividends are expected to continue to grow at 7.8 percent per year, forever. The price of the firm's common stock is
now $27.25.
c. A preferred stock that sells for $150, pays a dividend of 8.8 percent, and has a $100 par value.
d. A bond selling to yield 11.8 percent where the firm's tax rate is 34 percent.
a. The after-tax cost of debt is %. (Round to two decimal places.)
(Individual or component costs of capital) Compute the cost of 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 10.9 percent. Interest payments are $54.50 and are paid semiannually. The bonds have a current market value of
$1,121 and will mature in 10 years. The firm's marginal tax rate is 34 percet.
b. A new common stock issue that paid a $1.76 dividend last year. The firm's dividends are expected to continue to grow at 6.8 percent per year, forever. The price of the firm's common stock is now $27.84
c. A preferred stock that sells for $144, pays a dividend of 8.6 percent, and has a $100 par value.
d. A bond selling to yield 12.3 percent where the firm's tax rate is 34 percent.
(Individual or component costs of capital)
Compute the cost of 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 11.0 percent. Interest payments are $55.00 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percent.b. A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7.0 percent per year, forever. The price of the firm's common stock is now $27.50.c. A preferred stock that sells for $125, pays a dividend of 9.0 percent, and has a $100 par value. d. A bond selling to yield 12.0 percent where the firm's tax rate is 34 percent.
a. The after-tax cost of debt is %. (Round to two decimal places.)b. The cost of common equity is %. (Round to two decimal places.)c. The cost of preferred stock is %. (Round to…
Chapter 9 Solutions
Foundations Of Finance
Ch. 9 - Define the term cost of capital.Ch. 9 - Prob. 2RQCh. 9 - Why do firms calculate their weighted average cost...Ch. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 1SPCh. 9 - Prob. 2SPCh. 9 - (Cost of equity) In the spring of 2018, the Brille...
Ch. 9 - Prob. 4SPCh. 9 - Prob. 5SPCh. 9 - Prob. 6SPCh. 9 - Prob. 7SPCh. 9 - (Cost of internal equity) Pathos Co.s common stock...Ch. 9 - (Cost of equity) The common stock for the Bestsold...Ch. 9 - Prob. 10SPCh. 9 - Prob. 11SPCh. 9 - Prob. 12SPCh. 9 - a. Rework Problem 9-12 as follows: Assume an 8...Ch. 9 - (Capital structure weights) Wingate Metal...Ch. 9 - (Weighted average cost of capital) The capital...Ch. 9 - Prob. 17SPCh. 9 - Prob. 18SPCh. 9 - Prob. 19SPCh. 9 - (Divisional costs of capital and investment...Ch. 9 - Prob. 21SPCh. 9 - Prob. 2.1MCCh. 9 - If you were to evaluate divisional costs of...
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