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A company wishes to finance a new project. It will raise 40 million dollars using four borrowing ...


A company wishes to finance a new project. It will raise 40 million dollars using four borrowing sources. The sources will be
A company wishes to finance a new project. It will raise 40 million dollars using four borrowing sources. The sources will be 3 million bonds 11 million bank loan 10 million common stock and 16 million preferred stock. The bonds will be at a dividend rate of 6 percent issued quarterly. The bank loan will be at 12 percent paid monthly. Earning per share of common stock are taken to be 14 cents per share with a stock price of 15.00 dollars per share. (growth is ignored in this calculation ). For the preferred stock the annual earnings is 10 dollars per share with a share of preferred stock at 60 dollars and the cost of selling each preferred stock share is 2 dollars per share. The combined income tax rate is taken to be 35%. Determine the weighted average cost of capital. 1.
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Date OIS o1S) Cost o 3.99% or-4 Cost- Bank [(1-12)12-1X0.65 8.24 20.14 xlo0 Fivk 1S 033 6 o 13 . 33 . Wergiuted Averos 3 1 2-

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