A companys Balance Sheet (in millions) Assets Liabilities & Equity Current...
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Finance
A companys Balance Sheet (in millions)
Assets Liabilities & Equity
Current $ 80
Net Fixed $120 Bonds ($1000 Par) 130
Preferred stocks ($100 Par) 40
Total $200 Common Stock ($1 par) 30
Total $200
The company's bonds have 10 years to mature, pay 10% coupon rate semi-annually and comparable bonds' YTM is 14%.
The companys applicable tax rate is 40%.
The market price of common stock is $10.50 per share.
The common stock is constantly growing at a rate of 6%. The same growth rate is expected to continue for long time in the future. The most recent dividend on the common stock was $1.15.
The flotation cost for new common stocks is 10%.
The market value of the preferred stock is $45 and it pays quarterly dividend of $1.25.
The flotation cost on issuing new preferred stock is 7%
What is the cost of issuing new common stock?
18.90%
16.84%
19.52%
14.76%
11.84%
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