Purchase Solution

Cost of the equity

Not what you're looking for?

Ask Custom Question

Byron Corporation's present capital structure, which is also its target capital structure, is 40% debt ad 60% common equity. Next year's net income is projected to be $21,000 and Bryan's payout ratio is 30%. The company's earnings and dividends are growing at a constant rate of 5%; the last dividend (D0) was $2.00; and the current equilibrium stock price is $21.88. Bryon can raise all the debt financing it needs at 14%. If Bryon issues new common stock, a 20% flotation cost will be incurred. The firm's marginal tax rate is 40%.

What is the component cost of the equity raised by selling new common stock?

Purchase this Solution
Solution Summary

Response helps in computation of cost of the equity.

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • Cost of equity/WACC

    Calculate the weighted average cost of capital if the tax rate is 30%. If debt to equity is zero, the firm is fully equity and so we have to find the unlevered cost of equity.

  • Cost of equity

    273329 Cost of equity capital B2. (Cost of equity) The cost of capital is 15%, the before-tax cost of debt is 9%, and the marginal income tax rate is 40%. The market value of debt is $50 million and the market value of equity is $50 million.

  • Cost of equity

    a. 10% b. 15% c. 18% d. 21% e. none of the above We have to calculate the levered cost of equity given the unlevered cost of equity.

  • WACC: Weighted Average Cost of Capital

    Required: (a) If Jungle's cost of equity is 16.5 percent, its pretax cost of debt is _____ percent. (b) If instead you know the aftertax cost of debt is 5.7 percent, the cost of equity is _____ percent.

  • Cost of equity

    the cost of equity.

  • Financing and Valuation

    + (after-tax cost of debt*debt percent of equity) In this case, .23 = (Cost of equity*(1-.48)) + (.09*.48) .23 = (Cost of equity*.52) = .0432 .1868 = Cost of equity*.52 .3592 = Cost of equity The cost of equity is 35.92 percent.

  • Wal-Mart: Cost of Equity, WACC, Unlevered Cost of Equity, & Beta

    267820 Wal-Mart: Cost of Equity, WACC, Unlevered Cost of Equity, & Beta Estimate the cost of equity, WACC, and unlevered cost of equity for Wal-Mart, Incorporated (NYSE: WMT). Find the beta for Wal-Mart and: 1.

  • Pre-Tax Cost of Debt and Cost of Equity

    If instead you know that the after tax cost of debt is 6.4 percent, what is the cost of equity? Please show your work.

  • WACC

    Since the firm pays no taxes, the after tax cost of debt is the same. WACC=Cost of Equity*Weight of Equity + Cost of Debt*Weight of Debt WACC=17% * 40/60+12.36%*20/60 WACC = 15.45% The weight of equity is the proportion in the total.

  • Cost of Capital

    Then to get the WACC, use this formula = (Cost of Equity)*(Weight of Equity) + (Cost of Debt)*(Weight of Debt) Find the cost of equity using the CAPM formula - Cost of Equity= Riskfree rate + (market return-riskfree rate) X beta.

View More Related Solutions