HBM, Inc has the following capital structure: Assets $ 600,000 Debt $ 150,000 Preferred stock 90,000 Common stock 360,000 The common stock is currently selling for $16 a share, pays a cash dividend of $0.60 per share, and is growing annually at 4 percent. The preferred stock pays a $7 cash dividend and currently sells for $88 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt? Round your answer to two decimal places. % What is the cost of preferred stock? Round your answer to two decimal places. % What is the cost of common stock? Assume that the current $0.60 dividend grows by 4 percent during the year. Round your answer to two decimal places. % What is the firm’s weighted-average cost of capital? Round your answer to two decimal places.

HBM, Inc has the following capital structure: Assets $ 600,000 Debt $ 150,000 Preferred stock 90,000 Common stock 360,000 The common stock is currently selling for $16 a share, pays a cash dividend of $0.60 per share, and is growing annually at 4 percent. The preferred stock pays a $7 cash dividend and currently sells for $88 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt? Round your answer to two decimal places. % What is the cost of preferred stock? Round your answer to two decimal places. % What is the cost of common stock? Assume that the current $0.60 dividend grows by 4 percent during the year. Round your answer to two decimal places. % What is the firm’s weighted-average cost of capital? Round your answer to two decimal places.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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