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Philly Flooring is looking to go public with an IPO. In order to raise funds...

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Accounting

Philly Flooring is looking to go public with an IPO. In order to raise funds so the company can
expand beyond the Philadelphia area, they will be issuing bonds and common stock. They have
hired a local financial consultant who will charge a fee (or flotation cost) for handling the IPO.
The flotation costs are 5% of the suggested bond price and 3% of the projected stock price.
Given the following and a 20% corporate tax rate, calculate the cost of capital for each security
and in total for the IPO. Use the Dividend Growth Model for the stock.
Suggested Bond price = $905($1,000 Face Value)
Suggested Bond term =4 years
Suggested Bond Coupon rate =3.5%
Projected Stock Price = $25/share
Projected Stock Dividend = $0.70 per share
Growth rate =8%
kb =
kcs =
What would be the dividend if kcs equaled 10
%?
kb before flotation cost =
kb after flotation cost =
kcs before flotation cost =
kcs after flotation cost =

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