INPUTS USED IN THE MODEL P 0 $50.00 Net P pf $30.00 D pf $3.30 D 0 $2.10 g 7% B-

Question

INPUTS USED IN THE MODEL P0 $50.00 Net Ppf $30.00 Dpf $3.30 D0 $2.10 g 7% B-T rd 10% Skye's beta 0.83 Market risk premium, RPM 6.0% Risk free rate, rRF 6.5% Target capital structure from debt 45% Target capital structure from preferred stock 5% Target capital structure from common stock 50% Tax rate 35% Flotation cost for common 10% a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including
     flotation costs), and the cost of equity (ignoring flotation costs). Use both the DCF method and the CAPM method to find
     the cost of equity. Cost of debt:        B-T rd            INPUTS USED IN THE MODEL P0 $50.00 Net Ppf $30.00 Dpf $3.30 D0 $2.10 g 7% B-T rd 10% Skye's beta 0.83 Market risk premium, RPM 6.0% Risk free rate, rRF 6.5% Target capital structure from debt 45% Target capital structure from preferred stock 5% Target capital structure from common stock 50% Tax rate 35% Flotation cost for common 10% a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including
     flotation costs), and the cost of equity (ignoring flotation costs). Use both the DCF method and the CAPM method to find
     the cost of equity. Cost of debt:        B-T rd           

Explanation / Answer

a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the DCF method and the CAPM method to find the cost of equity. Cost of debt:        B-T rd

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