Purchase Solution

WACC, Cost of debt, cost of common and preferred stock

Not what you're looking for?

Ask Custom Question

Rollins Corporation is estimating its WACC. Its current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, paid semiannually, a current maturity of 20 years, and sell for $950. The firmâ??s preferred stock is trading at $100. The preferred stock pays $13 dividends per share. Rollins' beta is 1.2, and the risk-free rate is 10 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00. Its stock sells for $27.00 per share, and has a growth rate of 8%. The floatation cost is 5% for debt, 10% for preferred stock, and 25% for common stock. The firm's marginal tax rate is 40 percent.

What is Rollins' cost of existing debt (kd)?

What is Rollins' cost of new debt (kd)?

What is Rollins' cost of existing preferred stock (kp)?

What is Rollins' cost of new preferred stock (kp)?

What is Rollins' cost of existing common stock (ks)?

What is Rollins' cost of new common stock (ks)?

What is Rollins' weighted average cost of existing capital (WACC)?

What is Rollins' weighted average cost of new capital (WACC)?

Purchase this Solution

Solution Summary

The solution explains how to calculate WACC, cost of debt, cost of common and preferred stock

Purchase this Solution


Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.