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docker41 [41]
3 years ago
8

McDonald's Corp has a preferred stock paying a dividend of $19 and has a market price of $178. Calculate the cost of capital for

the preferred stock.
Business
1 answer:
Iteru [2.4K]3 years ago
3 0

Answer:

McDonald's Corp

The cost of capital for the preferred stock is:

10.67%

Explanation:

a) Data and Calculations:

Market price of preferred stock = $178

Preferred stock dividend = $19

Cost of capital = Preferred stock dividend/Market price of preferred stock * 100

= $19/$178 * 100

= 10.67%

b) The cost of capital for McDonald's preferred stock is the finance cost or interest cost that it must incur for financing its projects using preferred stock.  This represents the 10% of the preferred stock value that is paid out to preferred stockholders.

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1 year ago
Bros Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and
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Answer:

WACC=17.15%

Explanation;

MV of equity=EBIT8(1-t)/Ke          

MV of equity=100,000*(1-.31)/.18=$383,333  

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