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Home / Questions / Indvidual or component costs of capital) Compute the cos ofcapital for the firm for the fo

Indvidual or component costs of capital) Compute the cos ofcapital for the firm for the fo

Indvidual or component costs of capital) Compute the cos ofcapital for the firm for the following:

a. A bond that has a $1,000 par value (Face value) and acontract or coupon interest rate of 10.3 percent. Interest paymentsare $51.50 and are paid semiannually. The bonds have a currentmarket value of $1,129 and will mature in 10 years. The firm'smarginal tax rate is 34 percent.

b. A new common stock issue that paid a $1.79 dividend lastyear. The firm's dividends are expected to continue to grow at 6.2percent per year, forever. The price of the firm's co;mmon stock isnow $27.22.

c. A preferred stock that sells for $130, pays a dividend of 8.7percent, and has a $100 par value.

d. bond selling to yield 12.8 percent where the firm's tax rateis 34 percent.

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The after-tax cost of debt is ___%. (Round to two decimalplaces.)

Dec 04 2019 View more View Less

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