(c) A firm has determined its optimal capital structure which is composed of the following sources and target market val

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C A Firm Has Determined Its Optimal Capital Structure Which Is Composed Of The Following Sources And Target Market Val 1 (51.52 KiB) Viewed 33 times

(c) A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Source of Capital Target Market Proportions Long Term Debt 25% Preferred Stock 15% Common Stock 60% Total Firm Value 100% Debt: The firm can sell a 10-year, RM1,000 par value, 6% bond for RM945. Preferred Stock: The firm has determined it can issue preferred stock at RM70 per share par value. The stock will pay a RM8 annual dividend. Common Stock: A firm's common stock is currently selling for RM19 per share. BBF304/03 The dividend expected to be paid at the end of the coming year is RM1.85. Its dividend payments have been growing at a constant rate for the last four years. Four years ago, the dividend was RM1.50. Additionally, the firm's marginal tax rate is 35% Determine the weighted average cost of capital for the firm. (15 marks)