Cost of Capital Quiz - QUIZ-Cost of Capital Question 1 Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $8 and are

Cost of Capital Quiz - QUIZ-Cost of Capital Question 1...

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QUIZ-Cost of Capital Question 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? 7.31% 4.82% 9.79% 6.46% Question 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? 5.91% 6.35% 3.90% 4.19% Question 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
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