Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. Show all working. i. Total Market Value for the Firm ii. After-tax cost of Debt iii. Cost of Equity iv. Cost of Preferred Stock v. Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures:
Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments
Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80
Market Information - 6 percent market risk premium and 4 percent risk-free rate.
Required: Calculate the following if the company has a tax rate of 36 percent. Show all working.
i. Total Market Value for the Firm
ii. After-tax cost of Debt
iii.
iv. Cost of Preferred Stock
v. Weighted Average Cost of Capital
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