What is the after tax cost of new common

Question

The Allied Group intends to expand the company's operation by making significant investments in several opportunities available to the group. Accordingly, the group has identified a need for additional financing in preferred and new common stock and new bond issues.
New Debt

The company has been advised that new bonds can be sold on the market at par ($1000) with an annual coupon of 8%, for 30 years.

New Common Stock Market analysis has determined that given the positive history of the firm,new common stock can be sold at $29 per share, with the last dividend being paid of $2.25 per share. The growth rate on any new common stock has been estimated at a constant rate of 15% per year for the next 3 years.

Preferred Stock

New Preferred Stock can be issued with an annual dividend of 10% of par and is paid annually and currently would sell for $90 per share.

Questions: Address all of the following questions in a brief but thorough manner.

What is the after tax cost of new common stock, assuming constant growth in each of the next 3 years?

What would the dividend yield in each of the first three years if the growth rate is 12%?

What is the after tax component cost of new debt today?

Answer 1

Read all the guidelines and review the question carefully and on the basis of the facts and figures given in the assignment, respond all of the given questions in a brief however thorough approach. Q1. Determine the after tax cost of latest common stock, supposing constant growth in each of the subsequent 3 years? Q2. Determine the dividend outcome in each of the first 3 years if the growth rate is around 12%? Q3. Determine the after tax component cost of the new debt at present? Remember to write the answers of the above according to the APA style.