Cybersecure Corp. can sell common stock for $30 per share and its investors requ

Question

Cybersecure Corp. can sell common stock for $30 per share and its investors require a 12% return. However, the administrative or flotation costs associated with selling the stock amount to $2.00 per share. What is the cost of capital for Cybersecure if the corporation raises money by selling common stock? 18.67%, or 12% plus the flotation costs of 6.67% ($2/$30) 12%, because that is what the shareholders demand 12.86% 13.85% A corporate bond has a face value of $ 1,000 and a coupon rate of 9.5%. The bond matures in 12 years and has a current market price of $1,100. If the corporation sells more bonds it will incur flotation costs of $48 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital? 5.91% 5.71% 6.18% 5.31%

Explanation / Answer

12.86 5.19

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