Compute the cost of the capital for the firm for the following:?
a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.6%. The bonds have a current market value of $1,124 and will mature in 10 years. The firms marginal tax rate is 34%.
b. if the firms bonds are not frequently traded, how would you go about determining a cost of debt for this company?
c. A new common stock issue that paid a $1.74 dividend last year. The par value of the stock is $ 16, and the firm’s dividends per share have grown at a rate of 8.8% per year. This growth rate is expected to continue into the foreseeable future.
d. A bond selling to yield 12.4% for the purchaser of the bond. The borrowing firm faces a tax rate of 34%.