HBM, Inc. has the following capital structure: Assets $400,000 Debt $140,000 Preferred stock 20,000 Common stock 240,000 The common stock is currently selling for $15 a share, pays a cash dividend of $0.75 pershare, and is growing annnually at 6%. the preferred stock pats a $9 cash dividend and currently sells for $91 a share. the debt pays interest of 8.5 percent annually, and the firm is the 30 percent marginal taxx bracket. a. What is the after tax cost of debt? b. what is the cost of preferred stock? c. what is the cost of common stock? d. what is the firm's weighted average cost of capital?
HBM, Inc. has the following capital structure:
Assets $400,000
Debt $140,000
Preferred stock 20,000
Common stock 240,000
The common stock is currently selling for $15 a share, pays a cash dividend of $0.75 pershare, and is growing annnually at 6%. the preferred stock pats a $9 cash dividend and currently sells for $91 a share. the debt pays interest of 8.5 percent annually, and the firm is the 30 percent marginal taxx bracket.
a. What is the after tax cost of debt?
b. what is the cost of preferred stock?
c. what is the cost of common stock?
d. what is the firm's weighted average cost of capital?
Expert Answer
Related Finance Q&A
Q: Multinational companies are exposed to complex management and allocation of their resources. A multi...
A: Question 1:Calculate the change in the dollar value of inventory:
Q: Kelso Electric is an all-equity firm with 43,250 shares of stock outstanding. The company is conside...
A: As is situation: All equity, no debt, hence no interest payment, ignor taxes.Hence, Net income = EBI...
Q: Part 1 and Part II are independent. Please answer both parts. Part I: You are advising company ABC o...
A: Part I:Company ABC should choose Option #1. Because after one year Option #1 will have a present val...
Q: Participation #6: Why is it desirable to construct capital budgeting rules so that higher-risk pro...
A: A risk is a probability of unfavorable outcome. All investments are subjected to risks. So, a high ...
Q: If the volatility of a stock is .33, find the standard deviation of: (see the attachment for the rem...
A: Recall the Black Scholes model derivation.Log of the stock price is normally distributed.The expecte...
Q: I have a question and I literally don't know where to begin. I am provided with a table of stock pr...
A: Let me explain to you, what you have been asked to do. But before that let me explain what informati...
Q: An individual wishes to borrow $10,000 for a year and is offered the following alternatives: a. A 10...
A: Calculating the effective interest rate on borrowing option 10% loan discounted in advances. We have...
Q: 4. Future value of annuities There are two categories of cash flows: single cash flows, referred to ...
A: Annuity means the a regular amount of fixed amount at an regular periodic intervals of time. Oridnar...
Q: Tommy Corp. can borrow from its bank at 17 percent to take a cash discount. The terms of the cash d...
A: The terms of the cash discount are 3/19, net 45. Discount %age, D = 3%Discount period, DP = 19 daysF...
