Assignment:
The bond issues outstanding are
150 million of 10% series.........2021
50 million of 7% series...........2015
75 million of 5% series..........2011
The companies planning to sell $75 million of bond for next year to replace the debt due to expire 2008. Present market yield for similar BAA rated bonds is 12.1%. Company has 90 million of 7.5% non-collateral preferred stock outstanding. The preferred stock is currently priced at 80 per-share and dividend per-share as $7.80. Dividend growth rate is 8% for common stock; expected dividend $1.90 and selling $40 per share. Flotation cost $2.50 per share for preferred stock and $2.20 per share for common stock. Company has kept debt at 50% of assets and equity at 50%. The corporate tax rate 40%.
Compute and show formula:
A) Bond (debt)
B) Preferred stock
C) Common equity in the form of retained earnings
D) New common stock
E) WACC