Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last year. From

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Cost Of Capital Edna Recording Studios Inc Reported Earnings Available To Common Stock Of 4 400 000 Last Year From 1 (128.3 KiB) Viewed 34 times

Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last year. From those earnings, the company paid a dividend of $1.15 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35% debt, 20% preferred stock, and 45% common stock. It is taxed at a rate of 25%. a. If the market price of the common stock is $43 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $8 per share, what is the company's cost of new common stock financing? c. The company can issue $1.83 dividend preferred stock for a market price of $30 per share. Flotation costs would amount to $3 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 12% coupon, 10-year bonds that can be sold for $1,280 each. Flotation costs would amount to $30 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing?