Cash - 2,000,000; Acct Rec - 28,000,000; Inventories - 42,000,000; Net fixed assets - 133,000,000; total assets - 205,000,000 Acct Payable and Accruals 18,000,000; Notes payable- 40,000,000; Long-term debt - 60,000,000; preferred stock 10,000,000; common equity 77,000,00 - total claims 205,000,000, last year's sales were $225,000,000 there are 100,000 shares of $100 par, 9% dividend perpetual stock outstanding. the current market price is $90.00 and any new stock issued would incur a 3.33% per share flotation cost.
the company has 10 million shares of common stock outstanding with a current price of $14.00 per share. the stock exhibits a constant growth rate of 10%. the last dividend (Do) was $.80. The new stock could be sold with flotation cost of 15%.
The risk rate is currently 6% and the rate of return on the stock market as a whole is 14%. Your stock's beta is 1.22.
Stockholders require a risk premium of 5 percent above the return on the firm's bonds. the expects to have additional retained earnings 1$0 million in the coming year and expects depreciation expenses of $35 million.
Find the cost of the individual capital components:
b) preferred stock
c) retained earnings (avg. of CAPM, DCF, & bond yield + risk premium approaches)
d) new common stock