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Homework answers / question archive / a) Bella industry (Bella) is seeking your financial advice to determine the firm;s cost of capital

a) Bella industry (Bella) is seeking your financial advice to determine the firm;s cost of capital

Finance

a) Bella industry (Bella) is seeking your financial advice to determine the firm;s cost of capital. The following data is given to you

I) 20 years bond with 12% coupon was issued 10 years ago and is currently selling at RM1153.00. the firm's tax bracket is 40% and flotion cost is 20% of par value. The par value is RM1000.00
II) The current of its preferred stock is RM1.13 iissued with a divident of 10% of par value of Rm1. Flotation cost is 10% of its current price.
III) Bella's stock is currently selling at RM5 per share. The expected dividend for next year is RM0.44 and it is expected to grow ar a constant rate of 5%


Calculate the after tax cost of:
a) Debt
b) Preferred stock
c) Equity


b) Calculate the weighted average cost of capital (WACC) if the ratio is as follows:
a) debt 30%
b) Preferred stock 20%
c) Equity 50%

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