HBM, Inc has the following capital structure: Assets $ 600,000 Debt $ 150,000 Preferred stock 90,000 Common stock 360,000 The common stock is currently selling for $16 a share, pays a cash dividend of $0.60 per share, and is growing annually at 4 percent. The preferred stock pays a $7 cash dividend and currently sells for $88 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt? Round your answer to two decimal places. % What is the cost of preferred stock? Round your answer to two decimal places. % What is the cost of common stock? Assume that the current $0.60 dividend grows by 4 percent during the year. Round your answer to two decimal places. % What is the firm’s weighted-average cost of capital? Round your answer to two decimal places.

HBM, Inc has the following capital structure: Assets $ 600,000 Debt $ 150,000 Preferred stock 90,000 Common stock 360,000 The common stock is currently selling for $16 a share, pays a cash dividend of $0.60 per share, and is growing annually at 4 percent. The preferred stock pays a $7 cash dividend and currently sells for $88 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt? Round your answer to two decimal places. % What is the cost of preferred stock? Round your answer to two decimal places. % What is the cost of common stock? Assume that the current $0.60 dividend grows by 4 percent during the year. Round your answer to two decimal places. % What is the firm’s weighted-average cost of capital? Round your answer to two decimal places.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 11%, and its common stock currently pays a $2.75 dividend per share (D0 = $2.75). The stock's price is currently $33.00, its dividend is expected to grow at a constant rate of 9% per year, its tax rate is 40%, and its WACC is 13.55%. What percentage of the company's capital structure consists of debt?
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Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 12%, and its common stock currently pays a $4.00 dividend per share (Do $4.00). The stock's price is currently $28.50, its dividend is expected to grow at a constant rate of 4% per year, its tax rate is 25%, and its WACC is 12.90%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. % F
Hook Industries capital structure consists solely of debt and common equity. It can issue debt at rd 5 11%, and its common stock currently pays a $2.00 dividend per share (D0 5 $2.00). The stock’s price is currently $24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 35%, and its WACC is 13.95%. What percentage of the company’s capital structure consists of debt?
Blooming Ltd. currently has the following capital structure: Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and will mature in 25 years. Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend per share in the next financial year. The firm is maintaining 39% annual growth rate in dividend, which is expected to continue indefinitely. Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 14%. Company tax rate is 30%. Required: Complete the following tasks: 1. Calculate the current price of the corporate bond? 2. Calculate the current price of the ordinary share if tne average return of the shares in the same industry is 9%? 3. Calculate the current value of the preferred share if the average return of the shares in the same industry is 12% 4. Calculate the current market…
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