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6. Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and
50 percent common stock. The company can issue bonds at a yield to maturity of 8.4 percent.
The cost of preferred stock is 9 percent. The companys common stock currently sells for $30 a
share. The companys dividend is currently $2.00 a share (D0 = $2.00), and is expected to grow
at a constant rate of 6 percent per year. Assume that the flotation cost

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6. Johnson Industries finances its projects with 40 percent debt, 10.pdf

  • 1. 6. Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent common stock. The company can issue bonds at a yield to maturity of 8.4 percent. The cost of preferred stock is 9 percent. The companys common stock currently sells for $30 a share. The companys dividend is currently $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 6 percent per year. Assume that the flotation cost