Finance question – cost of capital

1. Compute the cost of capital for the firm for the following:

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a.A bond that has a $1,000.00 Par value (face value) and a contract or coupon interest rate of 11.2%.The bonds have a current market value of $1,123 and will mature in 10 years.The firms’ marginal tax rate is 34%

b.A new common stock issue that paid a $1.76 dividend last year.The firm’s dividends are expected to continue to grow 6.3% per year forever.The price of the firm’s common stock is now $27.62.

c.A preferred stock paying a 8.4% dividend on a $102 par value

d.A bond selling to yield 12.9% where the firm’s tax rate is 34%.

 

2. Your firm is considering a new investment proposal and would like to calculate the weighed average cost of capital to help in this, compute the cost of capital for the firm for the following

a.A bond that has a $1000.00 par value and a contract or coupon interest rate of 12.9. The bond is currently selling for a price of $1,121 and will mature in 10 years.The firm tax rate is 34%

b.If the firms’ bonds were not frequently traded, how would you go about determining a cost of debt for this company?

c.A new common stock issue that paid a $1.71 dividend last year.The par value of the stock is $15 and the firm’s dividends per share have grown at a rate of 7.6% per year.This growth rate is expected to continue into the foreseeable future.The price of this stock is now 28.38

d.A preferred stock paying a 10.2% dividend on $123 par value.The preferred shares are currently selling for $151.11

e.A bond selling to yield 13.6% for the purchaser of the bond.The borrowing firm faxes a tax rate of 34%

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Compute the cost of Capital for the following:

a.A bond that has a $1,000.00 Par value (face value) and a contract or coupon interest rate of 10.3%.The bonds have a current market value of $1,122 and will mature in 10 years.The firms’ marginal tax rate is 34%

b.A new common stock issue that paid a $1.77 dividend last year.The firm’s dividends are expected to continue to grow 6.6% per year forever.The price of the firm’s common stock is now $27.54.

c.A preferred stock paying a 9.2% dividend on a $121 par value

d.A bond selling to yield 11.3% where the firm’s tax rate is 34%.

 

4. Your firm is considering a new investment proposal and would like to calculate the weighed average cost of capital to help in this, compute the cost of capital for the firm for the following

a.A bond that has a $1000.00 par value and a contract or coupon interest rate of 12.2. The bond is currently selling for a price of $1,130 and will mature in 10 years.The firm tax rate is 34%

b.If the firms’ bonds were not frequently traded, how would you go about determining a cost of debt for this company?

c.A new common stock issue that paid a $1.72 dividend last year.The par value of the stock is $16 and the firm’s dividends per share have grown at a rate of 8.9% per year.This growth rate is expected to continue into the foreseeable future.The price of this stock is now 27.13

d.A preferred stock paying a 9.7% dividend on $120 par value.The preferred shares are currently selling for $146.89

e.A bond selling to yield 12.1% for the purchaser of the bond.The borrowing firm faxes a tax rate of 34%