write under the qustion

Question

Zion product corporations have the following capital, structure, which it considers optimal:

Bonds, 8% (par value $1000)…………….br 400000

Preferred stock………………………………200000

Common stock……………………………….300000

Retained earnings…………………………….300000

Total……………………………………………1200000

Additional information:

-dividends on common stock and preferred stocks are currently br 3 and br 5 per share respectively and are expected to grow at constant rate of 5% for common stocks.

-market price of common stock is br 30 and the preferred stock is selling at br 40

-flotation cost on new issues of common stock and preferred stock are $ 2 and 4 respectively.

-the bond is sold out at par value.

-the interest on bonds is paid annually for 5 years and the company’s tax rate is 40%

Calculate  A) the cost of bond

                  b) the cost of preferred stock

                  c) the cost of retained earning

                  d)the cost of new common stock

                  e) the weighted average cost of capital

Answer 1

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