The Holmes Company’s currently outstanding bonds have a 10% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes’ after-tax cost of debt?
The Evanec Company’s next expected dividend, D1, is $3.18; its growth rate is 6%; and its common stock now sells for $36.00. New stock (external equity) can be sold to net $32.40 per share.
Using the Gordon Model, what is Evanec’s cost of retained earnings, rs?
What is Evanec’s percentage flotation cost, F?
Using the Gordon Model, what is Evanec’s cost of new common stock, re?
You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 12.00%. The firm will not be issuing any new stock. What is its WACC?
The Sarco Company has a target capital structure of 30% debt, 10% preferred stock and 60% common equity from retained earnings. Sarco finished its most recent fiscal with $57 million in retained earnings and would like to raise capital to expand its operations.
Given the information provided above, What is Sarco’s retained earnings breakpoint?
Given the information provided above, how much new debt can Sarco raise and still maintain its current capital structure?
Given the information provided above, how much new preferred stock can Sarco raise and still maintain its current capital structure?
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