This preview shows page 1. Sign up to view the full content.
Unformatted text preview: 3. The current price of the firms 10 percent, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. Harry Davis would incur flotation costs equal to 5 percent of the proceeds on a new issue. 4. Harry Davis common stock is currently selling at $50 per share. Its last dividend (d ) was $4.19, and dividends are expected to grow at a constant rate of 5 percent in the foreseeable future. Harry Davis beta is 1.2; the yield on t-bonds is 7 percent; and the market risk premium is estimated to be 6 percent. For the bond-yield-plus-risk-premium approach, the firm uses a 4 percentage point risk premium. 5. Harry Davis target capital structure is 30 percent long-term debt, 10 percent preferred stock, and 60 percent common equity. To structure the task somewhat, Jones has asked you to answer the following questions....
View Full Document
- Spring '08