x
Info
x
Warning
x
Danger
 / 
 / 
 / 
Please show step by step because I keep getting confused

Question : Please show step by step because I keep getting confused : 4051

Please show step by step because I keep getting confused on what formula to use. Thank you!

North man's common equity, debt, and preferred equity are worth $70,000, $10,000 and $20,000 respectively with a total value is $100,000. The company’s common stock is currently listed at $54 per share; new preferred stock sells for $70 per share with a flotation cost of 10% and pays a dividend of $3.5 per share. Last year the company paid dividends of $2 per share on common stock, which is expected to grow at a constant rate of 5%. The local bank is willing to finance the project at 12% annual interest. Assuming the company’s tax rate is 35%, do the following computations:

What is the cost of common equity, assuming only retained earnings are used?

What is the cost of new preferred equity?

Solution
5 (1 Ratings )

Solved
Finance 1 Year Ago 148 Views
This Question has Been Answered!
Unlimited Access Free
Explore More than 2 Million+
  • Textbook Solutions
  • Flashcards
  • Homework Answers
  • Documents
Signup for Instant Access!
Ask an Expert
Our Experts can answer your tough homework and study questions
275782 Finance Questions Answered!
Post a Question