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 11.9 percent. Interest payments are $59.50 and are paid semiannually. The bonds have a current market value of $1,122 and will mature in 10 years. The firm’s marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.84 dividend last year. The firm’s dividends are expected to continue to grow at 6.5 percent per year, forever. The price of the firm’s common stock is now $27.69.
c. A preferred stock that sells for $144, pays a dividend of 8.9 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.
a. The after-tax cost of debt is ____% (Round to two decimal places)
b. The cost of common equity is ____% (Round to two decimal places)
c. The cost of preferred stock is ____% (Round to two decimal places)
d. The after-tax cost of debt it ____% (Round to two decimal places)