(individual or component of capital) Compute the cost of capital for the firm for the following:
A bond that has a $1,000 per value (face value) and a contract or coupon interest rate of 10.9%. The bond have a current market value of $1,122 and will mature in 10 years. The firm’s marginal tax rate is 34%.
A new common stock issue that paid a $1.76 dividend last year. The firm’s are expected to continue grown at 6.3% per year forever. The price of the firm’s common stock is now $27.66.
A preferred stock paying 9.2% dividend on a $120 par value.
A bond selling to yield 12.1% where the firm’s tax rate of 34%.
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