ProblemSet 9.docx BADM-534 Problem Set - Chapter 9 Business Administration, Universi

Document Content and Description Below

ProblemSet 9.docx BADM-534 Problem Set - Chapter 9 Business Administration, University of the Cumberlands Managerial Finance (BADM-534) Problem Set # 9 The stock of Matrix Computing sells f... or $65, and last year s dividend was $2.53. Security analysts are projecting that the common dividend will grow at a rate of 9% a year. A flotation cost of 12% would be required to issue new common stock. Matrix s preferred stock sells for $42.00, pays a dividend of $3.32 per share, and new preferred stock could be sold with a flotation cost of 10%. The firm has outstanding bonds with 25 years to maturity, a 15% annual coupon rate, semiannual payments, $1,000 par value. The bonds are trading at $1,271.59. The tax rate is 20%. The market risk premium is 5.5%, the risk-free rate is 7.0%, and Matrix s beta is 1.2. In its cost-of-capital calculations, Matrix uses a target capital structure with 40% debt, 10% pref. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Show More]

Last updated: 1 year ago

Preview 1 out of 6 pages