Aaron's Rentals has 58 000 common shares outstanding at a market price of $36 a share.The shares have just paid a $1.64 annual dividend and have a dividend growth rate of 2.8 per cent.There are 12 000 shares with a 6 per cent preference,outstanding at a market price of $51 a share.The preferred shares have a par value of $100.The outstanding bonds mature in 17 years,have a total face value of $750 000,a face value per bond of $1000,and a market price of $1011 each.The bonds pay 8 per cent interest,semi-annually.The tax rate is 34 per cent.What is the firm's weighted average cost of capital assuming a classical tax rate?

Question

Quizplus · Accepted Answer

The Answer of Aaron's Rentals has 58 000 common shares outstanding at a market price of $36 a share.The shares have just paid a $1.64 annual dividend and have a dividend growth rate of 2.8 per cent.There are 12 000 shares with a 6 per cent preference,outstanding at a market price of $51 a share.The preferred shares have a par value of $100.The outstanding bonds mature in 17 years,have a total face value of $750 000,a face value per bond of $1000,and a market price of $1011 each.The bonds pay 8 per cent interest,semi-annually.The tax rate is 34 per cent.What is the firm's weighted average cost of capital assuming a classical tax rate?

Aaron's Rentals Has 58 000 Common Shares Outstanding at a Market