Bundle: Contemporary Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
14th Edition
ISBN: 9781337587563
Author: MOYER, R. Charles; McGuigan, James R.; Rao, Ramesh P.
Publisher: Cengage Learning
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Chapter 12, Problem 3P
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To determine: The after-tax cost of
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Calculate the after-tax cost of preferred stock for Bozeman-Western Airlines Inc. which is planning to sell $10 million of $6.50 cumulative preferred stock to the public at a price of $50 a share. Issuance costs are estimated to be $2 a share. The company has a marginal tax rate of 40 per cent.
Calculate the after-tax cost of preferred stock for Ohio Valley Power Company, which is planning to sell $100 million of $3.25 cumulative preferred stock to the public at a price of $25 per share. Flotation costs are $1.00 per share. Ohio Valley has a marginal income tax rate of 40%.
Wandel Inc. has $5,000,000 outstanding of 8 percent preferred stock; the company has a 40 percent tax rate. What is the after-tax cost of the preferred stock?
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Wandel Inc. has forecasted sales of $300,000. The firm's fixed operating costs total $75,000 and its variable operating costs are equal to 70% of this sales level. The company needs to pay $12,000 in interest each period. Its tax rate is 40% and it has 10,000 shares.
a) Compute the earnings before interest and taxes (EBIT) for a sales level of $300,000
b) Compute Earnings after taxes and compute the EPS for that sales level.
Chapter 12 Solutions
Bundle: Contemporary Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
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