Question

**(Individual or component costs of
capital)** Compute the cost of capital for the firm for
the following:

**a.** A bond that has a $1,000 par value (face
value) and a contract or coupon interest rate of 10.9 percent.
Interest payments are $54.50 and are paid semiannually. The bonds
have a current market value of $1,121 and will mature in 10 years.
The firm's marginal tax rate is 34 percet.

**b.** A new common stock issue that paid a $1.78
dividend last year. The firm's dividends are expected to continue
to grow at 7.7 percent per year, forever. The price of the firm's
common stock is now $27.32.

**c.** A preferred stock that sells for $127, pays
a dividend of 8.4 percent, and has a $100 par value.

**d.** A bond selling to yield 11.4 percent where
the firm's tax rate is 34 percent.

Answer #1

I have calculated cost of individual components of cost of capital below with detailed formulas.

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(Individual or component costs of capital) Compute the cost of
capital for the firm for the following: A bond that has a $1,000
par value (face value) and a contract or coupon interest rate of
10.8 percent. Interest payments are $54.00 and are paid
semiannually. The bonds have a current market value of $1,130 and
will mature in 15 years. The firm's marginal tax rate is 34
percent. A new common stock issue that paid a $1.77 dividend last
year....

(Individual or component costs of capital) Compute the cost of
capital for the firm for the following
a. A bond that has a $1,000 par value (face value) and a
contract or coupon interest rate of 10.1 percent. Interest payments
are $50.50 and are paid semiannually. The bonds have a current
market value of $1,130 and will mature in 10 years. The firm's
marginal tax rate is 34 percent.
b. A new common stock issue that paid a
$1.77 dividend...

(Individual or component costs of capital) Compute the cost of
capital for the firm for the following: a. A bond that has a $1
comma 000 par value (face value) and a contract or coupon interest
rate of 10.9 percent. Interest payments are $54.50 and are paid
semiannually. The bonds have a current market value of $1 comma 128
and will mature in 10 years. The firm's marginal tax rate is 34
percet. b. A new common stock issue that...

(Individual or
component costs of capital) Your firm is considering a new
investment proposal and would like to calculate its weighted
average cost of capital. To help in this, compute the cost of
capital for the firm for the following:
A bond that has a $1,000 par value (face value) and a contract
or coupon interest rate of 10.9 percent that is paid semiannually:
the bond is currently setting for a price of $1,129 and will mature
in 10 years....

(Individual or component costs of capital) Compute the cost of
capital for the firm for the following:
A new common stock issue that paid a $1.77 dividend last year.
The firm's dividends are expected to continue to grow at 8.4
percent per year, forever. The price of the firm's common stock is
now $27.61.

(Individual or component costs of capital) Compute the cost of
capital for the firm for the following:
1.A preferred stock that sells for $141, pays a dividend of 8.5
percent, and has a $100 par value.
2. A bond selling to yield 10.4 percent where the firm's tax
rate is 34 percent.

Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has
$1,000
par value (face value) and a contract or coupon interest rate
of
11
percent. A new issue would have a floatation cost of
6
percent of the
$1115
market value. The bonds mature in
9
years. The firm's average tax rate is 30 percent and its
marginal tax rate is
33
percent.
b. A new common stock issue that paid a
$1.60...

1. Compute the component costs of capital for a firm with the
following information:
a. A bond that has a $1,000 par value and a coupon interest rate
of 11%, paid semiannually. The bonds have a current market value of
$1,125 and will mature in 10 years.
b. A common stock issue that paid a $1.80 dividend last year.
The firm’s dividends are expected to continue to grow at 7% per
year forever. The price of the firm’s common stock...

Individual
or component costs of
capital)
Compute the cost of the following:a. A bond that has
$1,000
par value (face value) and a contract or coupon interest rate
of
9
percent. A new issue would have a floatation cost of
9
percent of the
$1,130
market value. The bonds mature in
15
years. The firm's average tax rate is 30 percent and its
marginal tax rate is
35
percent.b. A new common stock issue that paid a
$1.80
dividend last...

(Individual or Component Costs of Capital) Compute the cost for
the following
sources of Financing:
a. A bond that has a $1,000 par value (face value) and a contract
or coupon
interior rate of 12%. A new issue would have a flotation cost of 6%
of the
$1,125 market value. The bonds mature in 10 years. The firm’s
average tax
rate is 30% and its marginal tax rate is 34%.
b. A new common stock issue paid a $1.75 dividend...

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