Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,800,000...
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Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,800,000 last year. From those earnings, the company paid a dividend of $1.23 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35% debt, 15% preferred stock, and 50% common stock. It is taxed at a rate of 21% a. If the market price of the common stock is $46 and dividends are expected to grow at a rate of 5% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $7 per share, what is the company's cost of new common stock financing? c. The company can issue $1.85 dividend preferred stock for a market price of $32 per share. Flotation costs would amount to $6 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 12% annual coupon, 10-year bonds that can be sold for $1,210 each. Flotation costs would amount to $40 per bond. What is the after-tax cost of debt financing? e. What is the WACC
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