How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Amol Srivastava Your Own Question
Amol Srivastava
Amol Srivastava, Accountant
Category: Finance
Satisfied Customers: 626
Experience:  More than 4years + of industry experience ,CFA level2 cleared, Chartered Accountant from India
Type Your Finance Question Here...
Amol Srivastava is online now
A new question is answered every 9 seconds

(Individual or component costs of capital) Compute the cost

Customer Question

(Individual or component costs of capital) Compute the cost for the following:

c. A bond that has a $1,000 par value and a contract or coupon interest rate of 12 percent. A new issue would net the company 90 percent of the $1,150 market value. The bonds mature in 20 years, the firm’s average tax rate is 30 percent, and its marginal tax rate is 34 percent.

d. A preferred stock paying a 7 percent dividend on a $100 par value. If a new issue is
offered, the company can expect to net $85 per share. Internal common equity where the current market price of the common stock is $38.
The expected dividend this forthcoming year should be $3, increasing thereafter at a
4 percent annual growth rate. The corporation’s tax rate is 34 percent.

Submitted: 8 years ago.
Category: Finance
Expert:  Amol Srivastava replied 8 years ago.

To get answers click here

If you need more details let me know

PS: In case you like my work and in future want to direct your questions to me please mention Amol in front of your posts.

Customer: replied 8 years ago.


Expert:  Amol Srivastava replied 8 years ago.
e is just the cost of equity capital. It is part of d only. Remove e and you are good to go.

Related Finance Questions