The firm’s preferred shares sell for $60 per share, and they pay $6 each year in dividends. The firm does not plan to issue new preferred stock next year.
Find the cost of preferred stock.
The flotation cost for bonds is 15%, or $150 per $1000 face value. The marginal tax rate is 34%.
Find the after-tax cost of debt if McNeil issues new bonds priced at par with term to maturity of 5 years and a 10% coupon rate.
Find the WACC if internal equity is used. Find the WACC if external equity is used.
What is the breakpoint for equity?