Bad Boys, Inc. is evaluating its cost of capital

Fin” rel=”nofollow”>inance

Bad Boys, Inc. is evaluatin” rel=”nofollow”>ing its cost of capital. Under consultation, Bad Boys, Inc. expects to issue new debt at par with a coupon rate of 8% and to issue new
preferred stock with a $2.50 per share dividend at $25 a share. The common stock of Bad Boys, Inc. is currently sellin” rel=”nofollow”>ing for $20.00 a share. Bad Boys, Inc. expects to
pay a dividend of $1.50 per share next year. An equity analyst foresees a growth in” rel=”nofollow”>in dividends at a rate of 5% per year. Bad Boys, Inc. margin” rel=”nofollow”>inal tax rate is 35%. If Bad
Boys, Inc. raises capital usin” rel=”nofollow”>ing 45% debt, 5% preferred stock, and 50% common stock, what is Bad Boys cost of capital? B. If Bad Boys, Inc. raises capital usin” rel=”nofollow”>ing 30%
debt, 5% preferred stock, and 65% common stock, what is Bad Boys cost of capital? C. On page 457, your textbook details the term Cannibalization. In your own words,
identify two corporations that have dealt with cannibalization and what steps were taken to overcome the cannibalization. Please provide any citations and references.

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