1. ABC corporation debt pays 10% annual interest. Also, they are in the 30% marginal tax bracket. What is the after-tax cost of debt?
2. XYZ stock sells for $15/share, pays a dividend of $1.10/share, and has a growth rate of 8%. Their preferred stock sells for $95/share and pays a dividend of $12/share.
A. What is the cost of preferred stock?
B. What is the cost of common stock?
3. Glover Corporation expects to sell new stock shares at $40/share. Floatation costs are estimated at 10% of the market price. Also, Glover Corp. pays $3.00 dividend/share with a growth rate of 9%.
A. Calculate the costs of retained earnings.
B. Calculate the cost of new stock.