Saint Leo Manufacturing is going to introduce a new product line and to accompli

Question

Saint Leo Manufacturing is going to introduce a new product line and to accomplish this it has four projects analyzed in which it wants to invest a total of $100 million. Your job is to find what it will cost to raise this amount of capital based on the cost of the capital as outlined below:
Investment A B C D
30,000 20,000 25,000 25,0000
Expected return
10.00% 14.00% 11.50% 16.00%

The firms capital structure is as follows
Capital structure

Debt 30% Fmv amount is 15,000,000

preferred stock 10% FMV amount 5,000,000
common stock 60% FMV amount 30,000,000
= 50,000,000
other info
corporate tax rate = 35%
Debt:
Current price 900.00 Market yield projected up to 20 million= 9%
annual interest 9.00% above 20 million = 12%
original maturity 25 * current interest paid semiannually but now has 20 years left
Maturity value 1,000.00
Preferred stock
Current price 50.00

last dividend 5.00

flotation 2.00

next dividend 5.00

Common stock

current price 33.00

last dividend 1.50

retained earning 16,000,000

growth rate 9%

flotation cost 3.00

next dividend 1.635

1. Current price of debt
2. Maturity value of debt
3. Interest payment on the debt
4. yield rate on the debt
5. annual yield on the debt
6. Kd
7. Kp
8. Ke
9. Current cost of capital
Assume Kd= 7% Kp= 11% Ke 14%
10. Knp preferred stock
11. New cost of capital
12. If the capital structure increases more than? ( in million dollars)
13. Kne common stock
if you cant come up with Kne return do the capital assuming Kp= 7% Knp= 12% and Ke= 14%
14. New cost of capital

Explanation / Answer

http://www.justanswer.com/finance/1lo2m-saint-leo-manufacturing-going-introduce-new-product.html

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