Business, 04.05.2021 01:00 chris858232

Lexington Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments: Debt: Capital can be raised through bank loans at a pretax cost of 11.2%. Also, bonds can be issued at a pretax cost of 7.2%. Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $62. Flotation costs will be $2 per share. The recent common stock dividend was $4.63. Dividends are expected to grow at 7% in the future. What is the cost of capital if the firm uses bonds and issues new common stock

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Lexington Corporation has a capital structure of 40% debt and 60% common equity. This capital struct...

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