Haverty Corp's bonds are selling to yield new investors a return of 9%, while its preferred stock is yielding 11%. Flotation costs are 10% of the proceeds of new issues sold to the public, and the firm's tax rate is 40%. The company just paid a dividend of $2.00 and is expected to grow at 6% indefinitely. Its stock is selling for $21.20.
a. What is Haverty's cost of debt?
b. What is Haverty's cost of preferred stock?
c .What is Haverty's cost of retained earnings using the expected growth approach?
d. What is Haverty's cost of new equity?

Question

Haverty Corp's bonds are selling to yield new investors a return of 9%, while its preferred stock is yielding 11%. Flotation costs are 10% of the proceeds of new issues sold to the public, and the firm's tax rate is 40%. The company just paid a dividend of $2.00 and is expected to grow at 6% indefinitely. Its stock is selling for $21.20. 
a. What is Haverty's cost of debt? 
b. What is Haverty's cost of preferred stock? 
c .What is Haverty's cost of retained earnings using the expected growth approach? 
d. What is Haverty's cost of new equity?

Quizplus · Accepted Answer

The Answer of Haverty Corp's bonds are selling to yield new investors a return of 9%, while its preferred stock is yielding 11%. Flotation costs are 10% of the proceeds of new issues sold to the public, and the firm's tax rate is 40%. The company just paid a dividend of $2.00 and is expected to grow at 6% indefinitely. Its stock is selling for $21.20. 
a. What is Haverty's cost of debt? 
b. What is Haverty's cost of preferred stock? 
c .What is Haverty's cost of retained earnings using the expected growth approach? 
d. What is Haverty's cost of new equity?

Haverty Corp's Bonds Are Selling to Yield New Investors a Return