Principles of Finance

What sources of capital should be included when you estimate Jana’s weighted average cost of capital?

Should the component costs be figured on a before-tax or an after-tax basis?

Should the costs be historical (embedded) costs or new (marginal) costs?

What is the market interest rate on Jana’s debt, and what is the component cost of this debt for WACC purposes?

What is the firm’s cost of preferred stock?

Jana’s preferred stock is riskier to investors than its debt, yet the preferred stock’s yield to investors is lower than the yield to maturity on the debt. Does this suggest that you have made a mistake? (Hint: Think about taxes.)

What are the two primary ways companies raise common equity?

Why is there a cost associated with reinvested earnings?

Jana doesn’t plan to issue new shares of common stock. Using the CAPM approach, what is Jana’s estimated cost of equity?

The requirements below must be met for your paper to be accepted and graded:

Write between 750 – 1,250 words (approximately 3 – 5 pages) using Microsoft Word in APA style.

Use font size 12 and 1” margins.

Include cover page and reference page.

At least 80% of your paper must be original content/writing.

No more than 20% of your content/information may come from references.

Use at least three references from outside the course material; one reference must be from EBSCOhost. Text book, lectures, and other materials in the course may be used, but are not counted toward the three reference requirement.

Cite all reference material (data, dates, graphs, quotes, paraphrased words, values, etc.) in the paper and list on a reference page in APA style.

References must come from sources such as scholarly journals found in EBSCOhost or on Google Scholar, government websites and publications, reputable news media (e.g. CNN , The Wall Street Journal, The New York Times) websites and publications

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APA Format, 930 words
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