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Business, 16.12.2019 21:31 brittanydeanlen

Rollins corporation has a target capital structure consisting of 20% debt, 20% preferred stock, and 60% common equity. assume the firm has insufficient retained earnings to fund the equity portion of its capital budget. it has 20-year, 12% semiannual coupon bonds that sell at their par value of $1,000. the firm could sell, at par, $100 preferred stock that pays a 12% annual dividend, but flotation costs of 5% would be incurred. rollins' beta is 1.2, the risk-free rate is 10%, and the market risk premium is 5%. rollins is a constant growth firm that just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8%. the firm's policy is to use a risk premium of 4% when using the bond-yield-plus-risk-premium method to find rs. flotation costs on new common stock total 10%, and the firm's marginal tax rate is 40%.refer to rollins corporation. what is rollins' cost of preferred stock?

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Rollins corporation has a target capital structure consisting of 20% debt, 20% preferred stock, and...
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