eBook Problem 21-01 HBM, Inc has the following capital structure: Assets $ 550,000 Debt $ 137,500 Preferred stock 82,500 Common stock 330,000 The common stock is currently selling for $16 a share,...

Problem 21-01

HBM, Inc has the following capital structure:

The common stock is currently selling for $16 a share, pays a cash dividend of $0.80 per share, and is growing annually at 5 percent. The preferred stock pays a $6 cash dividend and currently sells for $93 a share. The debt pays interest of 6.5 percent annually, and the firm is in the 30 percent marginal tax bracket.

1. What is the after-tax cost of debt? Round your answer to two decimal places.
   

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2. What is the cost of preferred stock? Round your answer to two decimal places.
   

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3. What is the cost of common stock? Assume that the current $0.80 dividend grows by 5 percent during the year. Round your answer to two decimal places.
   

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4. What is the firm’s weighted-average cost of capital? Round your answer to two decimal places.
   

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