1. Builtrite is planning on offering a $1000par value 20 years, 7% coupon bond with an expected selling price of $1025. flotation costs would be $55 per bond. preferred stock: Burtrite could sell a $46 par value preferred with a 7%couponn for $38 a share. Flotation cost would be $4 a share. common stock currently the stock is selling for 62$ a share and has paid a $3.82 dividend. dividends are expected to keep growing at 12% floatation costs would be $3.75 a share and Builtrite has $350,000 in retained earnings. Assume a 30% tax bracket. Their after-tax cost of preferred stock is? I need the whole solution ASAP!!!
A. 7.82%
B. 8.90%
C. 9.47%
D. 10.65%
2. Executives are often very heavily invested in their own stock. To mitigate the effects of this concentration, which of the following actions could they take?
A. Enter into an equity swap to pay the returns on their own stock in exchange for receiving Libor.
B. Enter into an equity swap to pay the returns on their own stock in exchange for receiving the returns on a broad equity index.
C. Buy collars on the stock.
D. All of the above.