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linda_us, Master's Degree
Category: Single Problem
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Experience:  A tutor for Business, Finance, Accounts and other related topics.
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A. A bond that has $1,000 par value and a contract or coupon

Customer Question

a. A bond that has $1,000 par value and a contract or coupon interest rate of 9%. A new issue would have a flotation cost of 5% of the $1100 market value. The bonds mature in10 years. The firm's average tax rate is 30%, and its marginal tax rate is 34%
b. New common stock issue that paid a $1.80 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 7% per year. This growth rate is expected to continue into the foreseeable future. The companymaintains a constant divdent-earnings ratio of 30%. The price of this stock is now $27.50, but 5% flotation costs (as a percent of market price) are anticipated
c.Internal common equity when the current market price of the common stock is $43. The expected dividend this coming year should be $3.50, increasing thereafter as a 7% annual growth rate. The corporation's tax rate is 34%
d. preferred stock paying a 9% dividend on a $150 par value. If a new issue us offered, floatation costs will be 12% of the current price of $175
e. A bond selling to yield 12% after flotation costs, but before adjusting for the marginal corporate tax rate of 34%. In the other words, 12% is the rate that equates the net proceeds from the bond with the present value of the future cash flows (principal and interest).
Submitted: 7 months ago.
Category: Single Problem
Expert:  F. Naz replied 7 months ago.


Please mention the deadline and let me know that is this your graded question?

Customer: replied 7 months ago.
today would be great as I fly out tomorrow morning (hence why I can struggle on this question). Not sure what you are asking. This is graded.
Expert:  F. Naz replied 7 months ago.

Sorry, I cannot help you in that case, thanks. I am opting out.

Customer: replied 7 months ago.
I want to opt out. I don't have 24 hours other wise I would not have used this site. I wanted help figuring this problem out. I don't want to be passed around.

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