Project #160232 - Finance

Business Tutors

Subject Business
Due By (Pacific Time) 12/18/2016 12:00 am

#2) Your firm is considering a new investment proposal  and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following:(a) A bondthat has a $1,000 par value(face value) and a contract or coupon interest rate of 12.3% that is paid semiannually. The bond is currently selling for a price of $1,127 and will mature in 10 yrs. The firm's tax rate is 34% (b) If the firm's bonds are not frequently traded, how would you go about determining  a cost of debt for this company? (c)A new common stock issue that paid a $1.72 dividendend last yr. The par value of the stock is $15, and the firm's  dividends per share have grown at a rate of 7.1% per yr. This growth rate is expected to continue into the foreseeable future. The price of this stock is now $28.06. (d) A preferred stock paying a 9.3 % dividend on a $128 par value. The preferred shares are currently selling for $149.89. (e) A bond selling to yeild 13.4% for the purchaser of the bond. The borrowing firm faces a tax rate of 34%.

#6)The preferred stock of Gator Industries sells for $34.81 and pays $2.73 per yr. in dividends.What is the cost of preferred stock financing ? If Gator were to issue 519,000 more preferred shares just like the ones it currently has outstanding, it could sell them for $34.81 a share but would incur flotation costs of $3.14 per share. What are the flotation costs for issuing the preferred shares and how should this cost be incorporated into the  NPV, of the project being financed?(round to the nearest dollar) kps=Divps/Pps=$2.73/$34.81=0.0784=7.84% (this is correct) I was not able to sove the next part.

#8)The common stock for the Hetterbrand Corporation  sells for $60.19, and the last dividend paid was $2.16. Five yrs. ago the firm paid $1.89 per share,and dividends are expected to grow at the same annual rate in the future as they did over the past five yrs. What is the estimated cost of common equity to the firm using the dividend growth model. ( round to two decimal places)

#9)Gillian Stationery Corporation needs to raise $644,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 8.2% with interest paid semiannually and a 15 yr. maturity. Investors require a rate of return of 10.4%.(a) market value of the bonds is --------.(b) How many bonds will the firm have to issue to receive the needed  funds? (c) What is the firm's after tax cost of debt if the firm's tax rate is 34%?

#10)Sincere Stationery Corporation  needs to raise $457,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10.7 % with interest paid semiannually and a 15  yr. maturity. Investors require a rate of return of 8.3%. (a) market value of the bonds is ---------------.(b) How many bonds will the firm have to issue to receive the needed funds?   (c) What is the firm's after tax cost of debt if the  firm's tax rate is 34%.

#12)Crypton Electonics has a capital structure consisting of 44% common stock and 56% debt. A debt issue of $1,000 par value,5.8% bonds that matures in 15 yrs.and pay annual interest will sell for $980. Commonstock of the firm is currently selling for $29.96 per share and the firm expects to pay a $2.26 dividend next yr. Dividends have grown at the rate of 5.2% per yr. and are expected to continue to do so far the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is 30%?

#(13)As a member of the Finance Department of Ranch manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating  the purchase of  new packaging equipment for the plant.Under  the assumption  that the firm's present captial structure reflects the appropriate mix of capital sources  for the firm, you have determined the market value of the firm's  capital structure is follows:  

Data table  

source of capital               market values  

 bonds                               $4,200,000

  preferred stock                    2,200,000  

common stock                        5,600,000  

To finance the  purchase, Ranch Manufacturing  will sell 10 yr . bonds paying interest at a rate of 6.7% per yr. (with semiannual payment) at the market price of $1,038.Preferred stock paying a $2.08 dividend can be sold for$25.33. Common stock for Ranch Manufacturing is currently selling for $55.06per share and the firm paid a $2.94 dividend last year. Dividends are expected to continue growing at a rate of 4.6% per yr. into the indefinite future. If the firm's tax rate is 30%, what discount rate should you use to evaluate the equipment  purchase?

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