FIN534 Strayer University Week 10 Bad Boys Inc Financial Management Discussion

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jsenmvre1212

Business Finance

FIN534

Strayer University

Description

Fin 534 Assignment Case Set 4 Week 10 Financial Management

Homework Set #4

Directions: Answer the following questions in a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.


  1. Bad Boys, Inc. is evaluating its cost of capital. Under consultation, Bad Boys, Inc. expects to issue new debt at par with a coupon rate of 8% and to issue new preferred stock with a $2.50 per share dividend at $25 a share. The common stock of Bad Boys, Inc. is currently selling for $20.00 a share. Bad Boys, Inc. expects to pay a dividend of $1.50 per share next year. An equity analyst foresees a growth in dividends at a rate of 5% per year. The Bad Boys, Inc. marginal tax rate is 35%. If Bad Boys, Inc. raises capital using 45% debt, 5% preferred stock, and 50% common stock, what is Bad Boys, Inc.’s cost of capital?
  2. If Bad Boys, Inc. raises capital using 30% debt, 5% preferred stock, and 65% common stock, what is Bad Boys, Inc.’s cost of capital?


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Explanation & Answer

Hello, kindly find the attached completed work. Thank You.

Running Head: COST OF CAPITAL

1

Cost of capital
Name
Institution of Affiliation
Date

COST OF CAPITAL

2

Bad Boys, Inc. Interpretation
Pre...


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