Jury Company Wants to Calculate the Component Costs in Its

question 34

Short Answer

Jury Company wants to calculate the component costs in its capital structure. Common stock currently sells for $33, and is expected to pay a dividend of $.50. Jury's dividend growth rate is 8%, and flotation cost is $1.25. Preferred stock sells for $40, pays a dividend of $3.00, and carries a flotation cost of $1.10. Jury Company bonds yield 7% in the market. Jury is in the 30% tax bracket.
Calculate the cost of debt, cost of new common stock, cost of preferred stock, and cost of retained earnings.

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Definitions:

Intensive Distribution

Distribution strategy that involves placing a firm’s products in nearly every available outlet.

Geographical Region

An area or part of the world that is distinct for its particular characteristics, whether natural, political, economic, or cultural.