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:
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?
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?
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WACC Answer – Excel Dr. Inez Black File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do Share X Σ AutoSum Calibri – 11 Α Α΄ ab Wrap Text General HA Fill Paste B I U Insert Delete Format A Merge & Center 09 $ % Clear Conditional Format as Cell Formatting Table Styles Styles Sort & Find & Filter Select Clipboard Font Alignment Number Cells Editing Dr. F9 fx B H K L M NA D E G Weighted Average Cost of Capital Market Value of Equity Cost of Market Value of Debt Total Value of Financing Equity Total Value of Financing WACC = Cost of Debt x (1-Tax Rate) А FIN534 Graduates are evaluating their cost of capital. Under consultation, FIN534 Graduates expects to issue new debt at par with a coupon rate of 15% and to issue new preferred stock with a $5.50 per share dividend at $75 a share. The common stock of

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