a company will expand its facilities. The company will attempt to Raise 75 mil

Tuesday July 19, 2022

a company will expand its facilities. The company will attempt
to Raise 75 million internally through retained earnings. The firms
capital structure has been 45% debt 10% perferrred stock and 45% equity.
The firm will try to maintain this capital structure in financing this
expansion plan. Currently their common stock is traded at a price of
$20.00 per share . Last years dividends was $1.50 per share The growth
rate is 8% The companys preferred stock is selling at $50.00 and has
been yeilding 6% in the current market. FLotation costs have been est.
at 8% of common stock and 3% of preferred stock The company has bonds
outstanding at 10% but its investment banker has informed the company
that interest rate for bonds of equal risk are currently yeilding 9% The
tax rate is 46%. A.COMPUTE THE COST OF Kd Kp Ke and Kn B. CALUCLATE
THE WIEGHTED AVERAGE COST OF CAPITAL USING Ke C. HOW LARGE A CAPITAL
STRUCTURE CAN THE FIRM SUPPORT WITH REAINED EARININGS FINANCING?


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