1
answer
0
watching
80
views
11 May 2018

• ACE’s stock has a current market price of $52.25 a share and the company expects to pay a dividend next year of $3 per share. • Dividends have been growing at a constant rate of 5% a year and are expected to continue that pattern. • The company also has a small amount of preferred stock outstanding that currently sells for $107 per share and pays an 8% of par value ($100) dividend. • ACE also has one bond issue outstanding that has a 7% coupon rate and pays interest annually. • Those $1,000 par value bonds currently have 9 years remaining to maturity and are selling for $941 each. • The total market value of the company’s common stock is $45 million, preferred stock $6 million, and debt is $33 million. • ACE’s marginal tax rate is 15%.

What weights would you use for ACE's debt, common stock, and preferred stock?

Calculate ACE's after-tax cost of debt.

Calculate ACE's cost of preferred stock.

Calculate ACE's cost of common stock.

For unlimited access to Homework Help, a Homework+ subscription is required.

Tod Thiel
Tod ThielLv2
12 May 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in

Related questions

Related Documents

Weekly leaderboard

Start filling in the gaps now
Log in