HIST 1402 Lecture Notes - Lecture 5: Tax Rate, Preferred Stock, Risk Premium
Document Summary
The following information applies to high tech, inc. High tech may issue new bonds with an 8. 5% coupon and 15-year maturity. The firm"s investment bank has indicated that flotation costs would be 1. 64% for this issue. The firm is able to issue par perpetual preferred for . 00 if the dividend is 9. 12%. The flotation expense totals . 00 of the preferred issue. High tech recently paid an annual dividend of . 75 per share, and common dividends are expected to grow at a constant 2. 85%. Flotation costs for a seasoned common equity offering would amount to 19. 4% of the proceeds. The current price for this firm"s stock is and its beta coefficient is 1. 2. The current yield on 20-year treasury bonds is 5. 4%, a-rated bonds have an average yield of 8. 8%, and the market risk premium is estimated to be 5. 5%.
