FIN 300 Quiz 5 Cost of Capital Solutions.pdf - FIN 300 QUIZ...

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FIN 300 QUIZ 5 Cost of Capital Solutions 1. Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $7 and are currently selling for $92 a share. What is the after- tax cost of preferred stock if the flotation cost for new shares is 6% and Builtrite is in the 34% marginal tax bracket?
1. Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $9 and are currently selling for $92 a share. What is the after- tax cost of preferred stock if the flotation cost for new shares is 4% and Builtrite is in the 34% marginal tax bracket?
2. Builtrite Furniture is considering selling bonds for a plant expansion. Currently, Builtrite believes that it could sell 20 year maturity, $1000 par value, 4 7/8% coupon bonds after flotation costs for $1020. If Builtrite is in the 34% marginal tax bracket, what is the after-tax cost for the bonds?

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