FIN 534 Week 10 Assignment Help | Strayer university
- strayer university / FIN 534
- 21 Dec 2020
- Price: $8
- Other / Other
FIN 534 Week 10 Assignment Help | Strayer university
COST OF CAPITAL
Instructions
Answer the following
questions in a separate document. Explain how you reached the answer or show
your work if a mathematical calculation is needed, or both. Submit your
assignment using the assignment link.
This course requires
the use of Strayer Writing Standards. For assistance and information, please
refer to the Strayer Writing Standards link in the left-hand menu of your
course. Check with your professor for any additional instructions.
Please respond to the
following:
1. Bad Boys, Inc. is evaluating its cost
of capital. Under consultation, Bad Boys, Inc. expects to issue new debt at par
with a coupon rate of 8% and to issue new preferred stock with a $2.50 per
share dividend at $25 a share. The common stock of Bad Boys, Inc. is currently
selling for $20.00 a share. Bad Boys, Inc. expects to pay a dividend of $1.50
per share next year. An equity analyst foresees a growth in dividends at a rate
of 5% per year. The Bad Boys, Inc. marginal tax rate is 35%. If Bad Boys, Inc.
raises capital using 45% debt, 5% preferred stock, and 50% common stock, what
is Bad Boys, Inc.’s cost of capital?
2. If Bad Boys, Inc. raises capital using
30% debt, 5% preferred stock, and 65% common stock, what is Bad Boys, Inc.’s
cost of capital?