Just Give me Assumption related to question. Give me proper explaination of Assumption. 1....
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Accounting
Just Give me Assumption related to question. Give me proper explaination of Assumption.
1. XYZ Company is undergoing a major expansion. The expansion will be financed by Issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Flotation expense on the new bonds will be $50 per bond. The marginal tax rate is 35%. What is the post-tax cost of debt for the newly-issued bonds?
2. ABC Corporation will issue new common stock to finance an expansion. The existing common stock just paid a $1.50 dividend, and dividends are expected to grow at a constant rate 8% indefinitely. The stock sells for $45, and flotation expenses of 5% of the selling price will be incurred on new shares. What is the cost of new common stock?
1)Describe and interpret the assumptions related to the problem.
2)Apply the appropriate mathematical model to solve the problem.
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