Question

11 - The company also has a number of shares outstanding of common stock. The company...

11 - The company also has a number of shares outstanding of common stock. The company has been doing well and is expected to pay a dividend of $3.85 next year. Dividends have grown at a constant rate of 5% and the market expects that growth rate to continue. The price of the common stock at yesterday’s close was $58.46. Given this information, and using the Dividend Growth Modal, (DGM), what is the cost of common equity?

12 - The capital structure of this company is as follows: $3,586.000 in corporate debt, $1,350,000 in preferred stock and $6,275,000 in common stock. What is the total Capital Structure? Given these numbers, please figure out the weights of debt, preferred stock and common stock.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer of Question 11:

D1 = $3.85

G =5%

P0 = $58.46

Cost of Common Equity = D1 / P0 + g
Cost of Common Equity = $3.85 / $58.46 + 0.05
Cost of Common Equity = 0.0659 + 0.05
Cost of Common Equity = 0.1159 or 11.59%

Answer of Question 12:

Total Capital Structure= Corporate Debt + Preferred Stock + Common Stock
Total Capital Structure = $3,586,000 + $1,350,000 + $6,275,000
Total Capital Structure = $11,211,000

Weight of Debt = $3,586,000 / $11,211,000
Weight of Debt = 0.3199

Weight of Preferred Stock = $1,350,000 / $11,211,000
Weight of Preferred Stock = 0.1204

Weight of Common Stock = $6,275,000/ $11,211,000
Weight of Common Stock = 0.5597

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The capital structure of Jolly Jellybeans Corp. is as follows: Debt: 40% Preferred stock: 10% Common...
The capital structure of Jolly Jellybeans Corp. is as follows: Debt: 40% Preferred stock: 10% Common stock: 50% Additional information about the company is also given: Price of common stock $35 Dividend (common stock) $1.25 Growth rate (common stock) 5% Price (preferred) $80 Dividend (preferred) $6.25 Flotation cost (preferred) $2.00 Bond YTM 8% Corporate tax rate 25% Compute Jolly’s WACC. (Hint: Start with computing the costs of each component in the capital structure.) State your answer as xx.xx% (for example...
The Wall Company has 131,000 shares of common stock outstanding that are currently selling at $29.69....
The Wall Company has 131,000 shares of common stock outstanding that are currently selling at $29.69. It has 4,310 bonds outstanding that won't mature for 20 years. They were issued at a par value of $1,000 paying a coupon rate of 6%. Comparable bonds now yield 9%. Wall's $100 par value preferred stock was issued at 8% and is now yielding 12%; 7,500 shares are outstanding. Assume that the coupon payments are semi-annual. Develop Wall's market value based capital structure....
XYC Inc. has 5 million shares of common stock outstanding. The current share price is $40....
XYC Inc. has 5 million shares of common stock outstanding. The current share price is $40. The company also has one bond issue outstanding and the bond market value is $300 million. The yield to maturity of this bond is 8%. For the common stock, the most recent dividend was $2 and the dividend growth rate is 8 percent. Assume that the tax rate is 30 percent. What is the cost of common stock? (5 points) What is the after-tax...
Western Electric has 23,000 shares of common stock outstanding at a price per share of $57...
Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The company also has 350 corporate bonds, each with $1000 par value, and the bond currently sells for 102 percent of face. The yield-to-maturity on the debt is 8.49...
Given the following information: Percent of capital structure:    Debt 10 % Preferred stock 5 Common...
Given the following information: Percent of capital structure:    Debt 10 % Preferred stock 5 Common equity 85    Additional information:   Bond coupon rate 13% Bond yield to maturity 11% Dividend, expected common $ 7.00 Dividend, preferred $ 14.00 Price, common $ 70.00 Price, preferred $ 110.00 Flotation cost, preferred $ 2.50 Growth rate 4% Corporate tax rate 30% Calculate the Hamilton Corp.'s weighted cost of each source of capital and the weighted average cost of capital. (Do not round...
The Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock...
The Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of $8.00, and 200,000 - $1000 par value bonds with a 10% coupon. The bonds pay interest semi-annually, and have 20 years to maturity. At present, the common stock is selling for $50 per share, the bonds for $950.62 each, and the preferred stock at $74 per share. The estimated required rate of return on the market is 13%,...
Percent of capital structure:    Debt 35 % Preferred stock 20 Common equity 45    Additional...
Percent of capital structure:    Debt 35 % Preferred stock 20 Common equity 45    Additional information:   Bond coupon rate 11% Bond yield to maturity 9% Dividend, expected common $ 5.00 Dividend, preferred $ 12.00 Price, common $ 60.00 Price, preferred $ 120.00 Flotation cost, preferred $ 3.80 Growth rate 8% Corporate tax rate 40% Calculate the Hamilton Corp.'s weighted cost of each source of capital and the weighted average cost of capital. Weighted Cost Debt= Preferred stock= Common equity=...
Given the following information: Percent of capital structure: Preferred stock 20 % Common equity 40 Debt...
Given the following information: Percent of capital structure: Preferred stock 20 % Common equity 40 Debt 40 Additional information: Corporate tax rate 34 % Dividend, preferred $ 8.50 Dividend, expected common $ 2.50 Price, preferred $ 105.00 Growth rate 7 % Bond yield 9.5 % Flotation cost, preferred $ 3.60 Price, common $ 75.00 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal...
Given the following information. Percent of capital structure: Debt 35 % Preferred stock 20 Common equity...
Given the following information. Percent of capital structure: Debt 35 % Preferred stock 20 Common equity 45 Additional information: Bond coupon rate 10 % Bond yield 8 % Dividend, expected common $6.00 Dividend, preferred $13.00 Price, common $65.00 Price, preferred $138.00 Flotation cost, preferred $5.20 Corporate growth rate 5 % Corporate tax rate 40 % Calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order shown in Table 11-1. (Do not round your...
 Crypton Electronics has a capital structure consisting of 40 percent common stock and 60 percent debt....
 Crypton Electronics has a capital structure consisting of 40 percent common stock and 60 percent debt. A debt issue of ​$1 comma 000 par​ value, 6.0 percent bonds that mature in 15 years and pay annual interest will sell for ​$975. Common stock of the firm is currently selling for ​$30.00 per share and the firm expects to pay a ​$2.25 dividend next year. Dividends have grown at the rate of 5.0 percent per year and are expected to continue...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT