fin quiz - 1 Builtrite Auto has preferred stock shares...

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1) Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $8 and are currently selling for $86 a share. What is the after-tax cost of preferred stock if the flotation cost for new shares is 5% and Builtrite is in the 34% marginal tax bracket? 2) Builtrite Furniture is considering sells bonds for a plant expansion. Currently, Builtrite believes that it could sell 15-year maturity, $1000 par value, 5 3/4% coupon bonds after flotation costs for $985. If Builtrite is in the 34% marginal tax bracket, what is the after-tax cost for the bonds? 3) Builtrite’s common stock is currently selling for $56 a share and the firm just paid an annual dividend of $3.20 per share. Management believes that dividends and earnings should grow at 9% annually. Based on this, and a marginal tax rate of 34%, what is the after-tax cost of common stock (or after-tax cost of retained earnings)? 4) Builtrite’s common stock is currently selling for $48 a share and the firm just paid an annual dividend of $2.30 per share. Management believes that
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Christopher Reinemann
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