Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / As an officer in a Company A, you need to determine the appropriate discount rate for the ...

As an officer in a Company A, you need to determine the appropriate discount rate for the purchase of new equipment for your company. The market value of capital resources for the purchase of this new

As an officer in a Company A, you need to determine the appropriate discount rate for the purchase of new equipment for your company. The market value of capital resources for the purchase of this new equipment are as follow : Capital Resources Market Value (RM) Bon 11'200'000 Preferred Stock 4'550'000 Common stock 19' 250'000 To finance the purchase of this equipment Company A will issue 10 year bond which pays interest of 7% per annum at a market price of RM1050. The floatation cost for this bond is 4% from the market price. The company will issue preferred stock that pay the dividend of RM2.00 and sell it at a price of RM25.00. The cost to issue this main stock is 2.5% per stock. Besides that, the common stock of Company A is sold for RM55 per stock. The company already paid the dividend of RM3.00 last year and this dividend will increase at a rate of 10% per annum. The floatation cost for this regular stock is RM5.00 per stock and the tax rate is 30%. The company does not intend to issue new regular stock. Based on the information above, calculate : (a) The cost of debt (bon) (b) The cost of preferred stock (c) The cost of regular stock (a) Weight average cost of capital (WACC)

Apr 09 2021 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions