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?

Question

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?

 

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