⢠ACEâs 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 companyâs common stock is $45 million, preferred stock $6 million, and debt is $33 million. ⢠ACEâs 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.
⢠ACEâs 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 companyâs common stock is $45 million, preferred stock $6 million, and debt is $33 million. ⢠ACEâs 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.