Question

Edna Recording​ Studios, Inc., reported earnings available to common stock of ​$4 comma 400 comma 0004,400,000...

Edna Recording​ Studios, Inc., reported earnings available to common stock of

​$4 comma 400 comma 0004,400,000

last year. From those​ earnings, the company paid a dividend of

​$1.251.25

on each of its

1 comma 000 comma 0001,000,000

common shares outstanding. The capital structure of the company includes

2525​%

​debt,

2020​%

preferred​ stock, and

5555​%

common stock. It is taxed at a rate of

2424​%.

a.  If the market price of the common stock is

​$4545

and dividends are expected to grow at a rate of

88​%

per year for the foreseeable​ future, what is the​ company's cost of retained earnings

financing​?

b.  If underpricing and flotation costs on new shares of common stock amount to

​$66

per​ share, what is the​ company's cost of new common stock

financing​?

c.  The company can issue

​$2.422.42

dividend preferred stock for a market price of

​$2525

per share. Flotation costs would amount to

​$66

per share. What is the cost of preferred stock

financing​?

d.  The company can issue

​$1 comma 0001,000​-par-value,

99​%

​coupon,

88​-year

bonds that can be sold for

​$1 comma 1401,140

each. Flotation costs would amount to

​$2020

per bond. Use the estimation formula to figure the approximate​ after-tax cost of debt​ financing?

e.  What is the

WACC​?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cost of capital    Edna Recording​ Studios, Inc., reported earnings available to common stock of $4,000,000 last...
Cost of capital    Edna Recording​ Studios, Inc., reported earnings available to common stock of $4,000,000 last year. From those​ earnings, the company paid a dividend of $1.15 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35​% debt, 15​% preferred​ stock, and 50​% common stock. It is taxed at a rate of 27​%. a.  If the market price of the common stock is $40 and dividends are expected to grow at a rate of...
Edna Recording​ Studios, Inc., reported earnings available to common stock of ​$5,000,000 last year. From those​...
Edna Recording​ Studios, Inc., reported earnings available to common stock of ​$5,000,000 last year. From those​ earnings, the company paid a dividend of ​$1.15 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 45​% ​debt, 10​% preferred​ stock, and 45​% common stock. It is taxed at a rate of 30​%.  If the market price of the common stock is ​$31 and dividends are expected to grow at a rate of 9​% per year for...
Edna Recording​ Studios, Inc., reported earnings available to common stock of ​$4,400,000 last year. From those​...
Edna Recording​ Studios, Inc., reported earnings available to common stock of ​$4,400,000 last year. From those​ earnings, the company paid a dividend of ​$1.33 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35​% ​debt, 20​% preferred​ stock, and 45​% common stock. It is taxed at a rate of 40​%. a. If the market price of the common stock is $50 and dividends are expected to grow at a rate of 6​% per year...
Calculation of individual costs and WACC   Lang Enterprises is interested in measuring its overall cost of...
Calculation of individual costs and WACC   Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the following data. The firm is in the 2424​% tax bracket. Debt  The firm can raise debt by selling ​$1 comma 0001,000​-par-value, 66​% coupon interest​ rate, 1515​-year bonds on which annual interest payments will be made. To sell the​ issue, an average discount of ​$5050 per bond would have to be given. The firm also must pay flotation costs...
Retained earnings versus new common stock   Using the data for a firm shown in the following​...
Retained earnings versus new common stock   Using the data for a firm shown in the following​ table, calculate the cost of retained earnings and the cost of new common stock using the​ constant-growth valuation model. Current market price per share Dividend growth rate Projected dividend per share next year Underpricing per share Flotation cost per share ​$60.00 77​% ​$1.80    ​$2.00 ​$2.00 a The cost of retained earnings is? ​(Round to two decimal​ places.) b.  The cost of new common...
question1- ChromeWoeld Industries finances its project with 15% debt, 5% preferred stock and 80% common stock....
question1- ChromeWoeld Industries finances its project with 15% debt, 5% preferred stock and 80% common stock. The company has 6 year 3% coupon bonds selling at 101 ( par is 100) The company’s preferred stock has a 5% preferred dividend on a par value of 100 that is currently priced at 99. Preferred has a flotation cost of .07. The company’s common stock currently sells for $25.50 a share and has a dividend that is currently $1.80 a share and...
Cost of common stock equity?? Ross Textiles wishes to measure its cost of common stock equity....
Cost of common stock equity?? Ross Textiles wishes to measure its cost of common stock equity. The? firm's stock is currently selling for ?$56.69. The firm expects to pay a? $3.21 dividend at the end of the year? (2016). The dividends for the past 5 years are shown in the following? table: Year Dividend per Share 2015 $2.94 2014 $2.61 2013 $2.31 2012 $2.26 2011 $2.07 After underpricing and flotation costs, the firm expects to net $53.29 per share on...
Cost of common stock equity?? Ross Textiles wishes to measure its cost of common stock equity....
Cost of common stock equity?? Ross Textiles wishes to measure its cost of common stock equity. The? firm's stock is currently selling for ?$41.3641.36. The firm expects to pay a ?$3.293.29 dividend at the end of the year? (2016). The dividends for the past 5 years are shown in the following? table: Year Dividend per Share 2015 $2.98 2014 ?$2.68 2013 ? $2.38 2012 $2.22 2011 ? $2.01 After underpricing and flotation? costs, the firm expects to net ?$36.81 per...
A company's common stock is currently selling at $40 per share. It's most recent divided was...
A company's common stock is currently selling at $40 per share. It's most recent divided was $1.60, and the financial community expects that it's dividend will grow at 10% per year in the foreseeable future. What is the company's equity cost of retained earnings? If the company sells new common stock to finance new projects and most pay $2 per share in flotation costs, what is the cost of equity?
Ross Textiles wishes to measure its cost of common stock equity. The​ firm's stock is currently...
Ross Textiles wishes to measure its cost of common stock equity. The​ firm's stock is currently selling for ​$61.65. The firm just recently paid a dividend of ​$4.14. The firm has been increasing dividends regularly. Five years​ ago, the dividend was just ​$3.04. After underpricing and flotation​ costs, the firm expects to net ​$56.72 per share on a new issue. a.  Determine average annual dividend growth rate over the past 5 years. Using that growth​ rate, what dividend would you...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT