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Manal Elkhoshkhany
Manal Elkhoshkhany, Tutor
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1. A bond has a $1,000 par value (face value) and a contract

Customer Question

1. A bond has a $1,000 par value (face value) and a contract or coupon interior rate of 8%. A new issue would have a flotation cost of 5% of the market value. The bonds mature in 10 years. The firm’s average tax rate is 28% and its marginal tax rate is 39%. The current price is $1100. What is the after tax cost of debt?
2. A new common stock issue paid a $1.50 dividend last year. The par value of the stock is $25, and earnings per share have grown at a rate of 3% per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend/earnings ratio of 40%. The price of this stock is now $30, but 4% flotation costs are anticipated. What is the cost of new common equity?
3. Internal common equity where the current market price of the common stock is $45.50. The expected dividend this coming year should be $4.00, increasing thereafter at a 6% annual growth rate. The corporation’s tax rate is 34%. What is the cost of common equity?
4. A preferred stock paying a 10% dividend on a $100 par value. If a new issue is offered, flotation costs will be 10% of the current price of $115. What is the cost of preferred equity?
5. The capital structure for the Shelby Corporation is provided below. The company plans to maintain its debt structure in the future. If the firm has a 5% after-tax cost of debt, a 12% cost of preferred stock, and a 20% cost of common stock, what is the firm’s weighted cost of capital?
6. A bond that has a $1,000 par value (face value) and a contract or coupon interior rate of 12%. A new issue would have a flotation cost of 6% of the market value. The bonds mature in 10 years. The firm’s average tax rate is 30% and its marginal tax rate is 34%.The current price is $989. What is after tax cost of debt?
7. A new common stock issue that paid a $1.75 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 8% per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend/earnings ratio of 30%. The price of this stock is now $28, but 5% flotation costs are anticipated. What is the cost of new common equity?
8. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. What is the cost of common equity
9. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150. What is the cost of preferred equity?
a. The capital structure for the Memphis Corporation is provided below. The company plans to maintain its debt structure in the future. If the firm has a 6% after-tax cost of debt, a 13.5% cost of preferred stock, and a 19% cost of common stock, what is the firm’s weighted cost of capital? Bonds 1100, Perferred stock 250 and common stock 3700
Submitted: 3 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 3 years ago.
Chat Conversation Started
BusinessTutor :

Hello

BusinessTutor :

Thank you for requesting me, but please advise your deadline for these

Expert:  Manal Elkhoshkhany replied 3 years ago.
Chat Conversation Ended

If you are still working with your Expert on this question, you can post additional replies and receive additional information on this page.  If you received a satisfactory answer in Chat, you can accept the chat conversation above.
Customer: replied 3 years ago.
The deadline is today. is there any additional information you need?
Expert:  Manal Elkhoshkhany replied 3 years ago.

I see that you have addressed the same questions to another expert, please note that this would be a waste to one of the experts' time because you keep posting the same questions over and over and getting many experts engaged while they could be helping other customers. Please advise who do you want to answer your questions, and close all other posts. You can close them by typing on each one that you want this post closed, or by contacting customer service and asking them to close all posts except the following one:

 

http://www.justanswer.com/questions/3vuw9-1-a-bond-has-a-1-000-par-value-face-value-and-a-contract

 

To contact customer service, please go to the following url:

 

http://www.justanswer.com/help/contact.aspx

 

Thank you

Customer: replied 3 years ago.
I am not working with anyone else. This is my first time on the site. I do apalogize. I am not very sure how to even proceed with you. I am working on removing the other expert now.
Expert:  Manal Elkhoshkhany replied 3 years ago.

Trust me I understand :) I was just explaining how things work :)

 

I will post the solutions in a couple of hours :)

 

Thanks a million for your trust

Customer: replied 3 years ago.
I have more questions and I want this to work out. Thank you. I have a few attachments that may help. Is there anyway to get them to you?
Expert:  Manal Elkhoshkhany replied 3 years ago.

you can upload the file to www.mediafire.com then copy and paste the share link here

 

Thank you

Customer: replied 3 years ago.

http://www.mediafire.com/?62264wzgg1t5hsc

 

i think this is all you need.

Expert:  Manal Elkhoshkhany replied 3 years ago.

Thanks a million :)

 

Would it be ok to post the solutions around 8 or 9 P.M. EST?

Customer: replied 3 years ago.
that is fine. how will it look completed? I need to show work for full credit. excel is best way. I am asking so I can plan for how much time i will need after I receive? on a side note I want to see the work becase I really need help learning the information as well.
Customer: replied 3 years ago.
are you okay with my last question?
Expert:  Manal Elkhoshkhany replied 3 years ago.

please advise the capital structure for question 5

 

Thank you

Customer: replied 3 years ago.

Capital Structure ($000)

Bonds

$1,100

Preferred stock

250

Common stock

3,700

 

 

 

 

these amounts were on the bottom of the last question. The last question (9a)ends with "what is the firm's weighted cost of capital?

 

Expert:  Manal Elkhoshkhany replied 3 years ago.

How would I have known ? Embarassed

 

Thank you

Customer: replied 3 years ago.
my mistake
Expert:  Manal Elkhoshkhany replied 3 years ago.
Don't worry about it Cool
Expert:  Manal Elkhoshkhany replied 3 years ago.

Something is wrong

 

The capital structure that you just posted is it for Shelby or Memphis? (5 or 10?)

 

There are 2 problems that should have the capital structures listed, please check

 

if you have the assignment in a file it might be a better idea to upload it to www.mediafire.com

 

Thanks

Customer: replied 3 years ago.

http://www.mediafire.com/?kc85s0t1yb9sc9d

 

 

let me know if your not able to get this. thank you

Expert:  Manal Elkhoshkhany replied 3 years ago.

There is missing information for one of those problems, you would need to email the instructor and ask him where are the capital structures for questions 5 & 10.

 

I am done with the solutions and can provide them using the same capital structure if you want me to

Customer: replied 3 years ago.
I am 90% sure the structure will be used for both questions. I will email the instructor however the likelihood of receiving a response today in not high.
Customer: replied 3 years ago.
please proceed using the same structure.
Expert:  Manal Elkhoshkhany replied 3 years ago.

I am done already :)

 

Please click here for the solutions

 

 

P.S. If you like my services, please feel free to direct your future posts to me specifically by typing "For BusinessTutor" at the beginning of your post. Should you choose to do this, please try to allow me 48 hours before the deadline. If you need to meet me online for a timed assignment, please advise me of the date and time (EST) you want me to meet you here and I will. Please make sure you take the length of the questions into consideration when making your offer to avoid delays in providing solutions.

 

Thank you

Manal Elkhoshkhany, Tutor
Category: Finance
Satisfied Customers: 9440
Experience: More than 5000 online tutoring sessions.
Manal Elkhoshkhany and other Finance Specialists are ready to help you
Customer: replied 3 years ago.
okay. I am reveiwing right now. I have an assignment due Tuesday. Would you like to preview that in file share to save time?
Expert:  Manal Elkhoshkhany replied 3 years ago.

Did you get them? Please remember that you need to click the green accept button so that I get paid for my work.

 

P.S. You can do that , but please open a new post for the new question

Customer: replied 3 years ago.

I put the assignment in here so that you can look and give me your opinion before a transfer more funds out. This is due Tuesday and needs both a word dock and excel. I can move your summary to word later for proper formatting.

 

I accepted the answer, added a tip, and left positive feedback. This is the next assignment. If you are willing to do this let me know and I will post tonight. There is one stock valuation and a investment question. The two are not related. thank you

 

The company is preparing to make investments and wants to determine the discount rate, or cost of capital, at which to value these investments.

You are given the following for Cardinal & Cardinal, Inc. Their tax rate is 34%. The firm is in need of $5 million dollars in external funds. Your bond advisor suggests that new bond issues can be lower than the current yield to maturity by 1.5% .

Existing capital structure:

  • C&C Debt: 4,000 Eight percent (8%) coupon bonds outstanding. The par value is $1000 and they mature in ten years. They are currently selling for $1010 and make semiannual payments.
  • C&C Equity: 50,000 shares outstanding. The common stock is currently selling for $62 per share. The beta for the company is 1.10.
  • C&C Preferred Stock: 9,000 shares of 4% preferred stock with a par value of $100, and is currently selling for $60 per share.
  • Market Information: The risk of the market is 8% and the risk-free rate is 3%. The industry debt-equity ratio is 33%. The flotation rate for debt is 3% and for equity it is 4%.

Calculate the existing weighted average cost of capital, Calculate the new cost of capital when the $5M in new funds is added. Show your calculations of the capital structure, assess the capital structure, compare recommend the new funding choice impacts on capital structure, and determine the firm's new weighted average cost of capital in a executive summary of 3 to 5 pages.

 

Stock Valuation

 

What is the value of a stock with

A Dividend at time zero of $1.25, a required rate of return of 14%, and expected growth of 12% for 5 years followed by a constant growth rate of 4%?

A Dividend at time zero of $2.50 , a required rate of return of 18%, and expected growth of 15% for 7 years followed by a constant growth rate of 2%?

A Dividend at time zero of $5, a required rate of return of 28%, and expected growth of 25% for 5 years followed by a constant growth rate of 2%?

A dividend of $5, a required rate of return of 12%, and expected growth of 10% for 4 years followed by 3% growth.?

Customer: replied 3 years ago.
Let me know if that was okay for me todo and your thoughts on completing this? Not sure if your still online? thank you.
Expert:  Manal Elkhoshkhany replied 3 years ago.

Hello

 

I am sorry I had to log out. Yes, I can help with that, please repost on a new post, but remember to type "For BusinessTutor" at the beginning of the post.

 

Is this from the book?

Customer: replied 3 years ago.
The question has been sent.

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