cost of capital, accounting homework help

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A. Bad Boys, Inc. is evaluating 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 selling 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 dividends at a rate of 5% per year. Bad Boys, Inc.
marginal tax rate is 35%. If Bad Boys, Inc. raises capital using 45% debt, 5%
preferred stock, and 50% common stock, what is Bad Boys cost of capital?

B. If Bad Boys, Inc. raises capital using 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. Please be articulate in your responses

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