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Unformatted text preview: the firm believes that it can net $781.99 from the sale of each bond after any related flotation costs, and if the firms marginal tax rate is 38 percent, then what is the after-cost of debt to this firm? A. 6.64% B. 6.73% C. 6.82% D. 6.91% E. 7.00% 17. A firms common stock has just paid a dividend (D ) of $1.00 per share. This dividend is expected to grow at a long-run constant growth rate of 15 percent and investors require a 20 percent rate of return on this stock. If the firm issues new shares of stock it assumes that they will sell for the same price that investors are willing to pay today, but the firm will have to pay flotation costs equal to 15 percent of this price. If the firms marginal tax rate is 38 percent, then what is the firms cost (their required rate of return) for a new issue of common stock? A. 20.32% B. 20.46% C. 20.60% D. 20.74% E. 20.88%...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08
- Cost Of Capital