Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 6% coupon bond with an expected selling price of $1025. Flotation costs would be $55 pe bond. Preferred Stock: Builtrite could sell a $46 par value preferred with a 6% coupon for $38 a share. Flotation costs would be $2 a share. Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82 dividend. Dividends are expected to continue growing at 11%. Flotation costs would be $ 3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 25% tax bracket. Their afte -tax cost of internal common (retained earnings) is: 15.72% 16.05% 15.51% 16.58% ა c Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 6% coupon bond with an expected selling price of $1025. Flotation costs would be $55 per bond. Preferred Stock: Builtrite could sell a $46 par value preferred with a 6% coupon for $38 a share. Flotation costs would be $2 a share. Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82 dividend. Dividends are expected to continue growing at 11%, Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 25% tax bracket. Their after-tax cost of internal common (retained earnings) is: 15.72% 16.05% O 15.51% 16.58%
Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 6% coupon bond with an expected selling price of $1025. Flotation costs would be $55 pe bond. Preferred Stock: Builtrite could sell a $46 par value preferred with a 6% coupon for $38 a share. Flotation costs would be $2 a share. Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82 dividend. Dividends are expected to continue growing at 11%. Flotation costs would be $ 3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 25% tax bracket. Their afte -tax cost of internal common (retained earnings) is: 15.72% 16.05% 15.51% 16.58% ა c Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 6% coupon bond with an expected selling price of $1025. Flotation costs would be $55 per bond. Preferred Stock: Builtrite could sell a $46 par value preferred with a 6% coupon for $38 a share. Flotation costs would be $2 a share. Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82 dividend. Dividends are expected to continue growing at 11%, Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 25% tax bracket. Their after-tax cost of internal common (retained earnings) is: 15.72% 16.05% O 15.51% 16.58%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Bonds: Builtrite is planning on offering a $1000 par
value, 20 year, 6% coupon bond with an expected
selling price of $1025. Flotation costs would be $55 pe
bond. Preferred Stock: Builtrite could sell a $46 par
value preferred with a 6% coupon for $38 a share.
Flotation costs would be $2 a share. Common stock:
Currently, the stock is selling for $62 a share and has
paid a $2.82 dividend. Dividends are expected to
continue growing at 11%. Flotation costs would be $
3.75 a share and Builtrite has $350,000 in available
retained earnings. Assume a 25% tax bracket. Their afte
-tax cost of internal common (retained earnings) is:
15.72% 16.05% 15.51% 16.58%
ა
c
Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 6% coupon bond
with an expected selling price of $1025. Flotation costs would be $55 per bond.
Preferred Stock: Builtrite could sell a $46 par value preferred with a 6% coupon for $38
a share. Flotation costs would be $2 a share.
Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82
dividend. Dividends are expected to continue growing at 11%, Flotation costs would be
$3.75 a share and Builtrite has $350,000 in available retained earnings.
Assume a 25% tax bracket.
Their after-tax cost of internal common (retained earnings) is:
15.72%
16.05%
O 15.51%
16.58%
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