A company’s bonds have a yield to its bondholders of 8%. If the company has a 34% tax rate, what is its after-tax cost of debt?
A company has 10 year, $1000 par value bonds issued that pay an annual coupon of $60 and currently sell for $866. If the company has a 34% tax rate, what is its pre-tax and after-tax cost of debt?
A company plans to issue new preferred stock with a par value of $100 and a dividend rate of 6%. If the preferred stock currently has a market price of $110 and flotation costs are 4% of the market price, what is the cost of new preferred stock?
A company currently pays a $4 dividend on its common stock and the stock has a price of $36. If the company has constant growth in its dividends of 5%, what is the cost of its retained earnings?
A company has a beta of 1.5. If the market risk premium is 10% and the current risk free rate is 5%, what is the cost of the company’s retained earnings? How does the answer change if the expected return of the market is 15%?
A company plans to issue additional stock. It currently pays a dividend of $4 and expects the dividend to grow at a constant rate of 3%. If the current price is $50 and flotation costs will be $1 per share, what is the cost of new equity?
A company currently has 2000 bonds issued with a par value of $1000 and a price of $750, $500,000 of preferred stock issued, and 100,000 shares of common stock with a price of $60 and a par value of a dollar. What are the weights of each of its capital components?