School of Business, BBA 3. a) Premium Industries Inc. is planning to raise funding through...
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School of Business, BBA 3. a) Premium Industries Inc. is planning to raise funding through issuance of bonds. Maturity is 15 years and the par value is $1000. Calculate the before tax cost of issuing bonds for the company using the approximation method if the coupon rate is 8%, the flotation costs are 4% and the selling price is $945 on the bonds. b) Premium Industries Inc. will also issue preferred stock which is expected to sell for $88 per share. The cost of selling is expected to be $5 per share. The dividend rate is 10% of the value of each share. Calculate the cost of issuing preferred stock for the company. [6+6=12]
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