The Financial controller of “Grizzlies Corporation” is about to select among three available projects. He was provided the following information:
Rate of return
The company can acquire it’s capital from a combination of debt for $1,400,000 and preferred stocks for $600,000.
• The corporation estimates that it can issue Bonds at a coupon rate of 10 percent, and the YTM will be 9 percent.
• The company is in the 40 percent tax bracket.
• The company can issue preferred stock at $75 per share, which pays a constant dividend of $6.75 per year.
Questions 11→15 refers to Case Three.
11. The weights of debt and preferred equity are respectively:
B.70% ; 30%
C.40% ; 60%
12. The cost of preferred stock is:
13. The after tax cost of debt is:
14. The Weighted Average Cost of Capital is:
15. The project(s) that can be accepted by the company is(are):
C.None of them
D.All of them.