What is the firm’s after tax cost of debt

(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 6 percent. A new issue would have a floatation cost of 8 percent of the $1, 125 market value. Thebonds mature in 5 years. The firm’s average tax rate is 30 percent and its marginal tax rate is 33 percentb. A new common stock issue that paid a $1.50 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 9 percent per year. This growth rate isexpected to continue into the foreseeable future. The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now $25, but 7 percent flotation costsare anticipated.c. Internal common equity when the current market price of the common stock is $45. The expected dividend this coming year should be $3.50, increasing thereafter at an annual growthrate of 7 percent. The corporation’s tax rate is 33 percent.d. A preferred stock paying a dividend of 12 percent on a $150 par value. If a new issue is offered, flotation costs will be 16 percent of the current price of $178.e. A bond selling to yield 11 percent after flotation costs, but before adjusting for the marginal corporate tax rate of 33 percent. In other words, 11 percent is the rate that equates the netproceeds from the bond with the present value of the future cash flows (principal and interest).

Don't use plagiarized sources. Get Your Custom Essay on
What is the firm’s after tax cost of debt
Just from $13/Page
Order Essay
Calculate your order
Pages (275 words)
Standard price: $0.00
Client Reviews
4.9
Sitejabber
4.6
Trustpilot
4.8
Our Guarantees
100% Confidentiality
Information about customers is confidential and never disclosed to third parties.
Original Writing
We complete all papers from scratch. You can get a plagiarism report.
Timely Delivery
No missed deadlines – 97% of assignments are completed in time.
Money Back
If you're confident that a writer didn't follow your order details, ask for a refund.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00
Power up Your Academic Success with the
Team of Professionals. We’ve Got Your Back.
Power up Your Study Success with Experts We’ve Got Your Back.
Live Chat+1(978) 822-0999EmailWhatsApp

Order your essay today and save 20% with the discount code GOODESSAY