This preview shows page 1. Sign up to view the full content.
Unformatted text preview: A. 10.14% B. 9.27% C. 9.85% D. 8.98% E. 9.56% 27. Assume that a firm expects that its common stock dividend will be $1.90 next year (D 1 ). It also believes that if it sells new shares, the market will be willing to pay $37.50 per share, but that the firm would only net $33.00 per share after adjusting for flotation costs. Given this data, and assuming that the firms longrun sustainable growth rate is 6 percent, determine the firms cost of new equity. A. 11.52% B. 12.00% C. 11.04% D. 11.28% E. 11.76% 28. Assume that a firms optimal capital structure consists of $30,000,000 of debt at a beforetax cost of debt (K D ) of 8 percent, $10,000,000 of preferred stock at a cost of preferred (K P ) of 8 percent, and $60,000,000 of stock at a cost of stock (K S ) of 14 percent. Assuming that the firms tax rate is 40%, determine the firms weighted average cost of capital (WACC). A. 10.34% B. 11.24% C. 10.94%...
View
Full
Document
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
 Staff
 Cost Of Capital

Click to edit the document details