On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to rai
Posted: Fri Jul 01, 2022 7:48 am
On January 1, the total market value of the Tysseland Companywas $60 million. During the year, the company plans to raise andinvest $20 million in new projects. The firm's present market valuecapital structure, here below, is considered to be optimal. Thereis no short-term debt.
New bonds will have an 8% coupon rate, and they will be sold atpar. Common stock is currently selling at $30 a share. Thestockholders' required rate of return is estimated to be 12%,consisting of a dividend yield of 4% and an expected constantgrowth rate of 8%. (The next expected dividend is $1.20, so thedividend yield is $1.20/$30 = 4%.) The marginal tax rate is25%.
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I. rs and the WACC willincrease due to the flotation costs of new equity.II. rs and the WACC willdecrease due to the flotation costs of new equity.III. rs will increase and theWACC will decrease due to the flotation costs of new equity.IV. rs will decrease and theWACC will increase due to the flotation costs of new equity.V. rs and the WACC will notbe affected by flotation costs of new equity.
-Select-IIIIIIIVV
New bonds will have an 8% coupon rate, and they will be sold atpar. Common stock is currently selling at $30 a share. Thestockholders' required rate of return is estimated to be 12%,consisting of a dividend yield of 4% and an expected constantgrowth rate of 8%. (The next expected dividend is $1.20, so thedividend yield is $1.20/$30 = 4%.) The marginal tax rate is25%.
$
%
I. rs and the WACC willincrease due to the flotation costs of new equity.II. rs and the WACC willdecrease due to the flotation costs of new equity.III. rs will increase and theWACC will decrease due to the flotation costs of new equity.IV. rs will decrease and theWACC will increase due to the flotation costs of new equity.V. rs and the WACC will notbe affected by flotation costs of new equity.
-Select-IIIIIIIVV