Question
1. Milton is a company with 150 million in outstanding debt. Their stock price is currently $6 and they have 50 million shares outstanding. The
1. Milton is a company with 150 million in outstanding debt. Their stock price is currently $6 and they have 50 million shares outstanding. The beta of equity is 1 and they plan to maintain their debt to equity ratio moving forward. Debt is risk free. The corporate tax rate is 40% and the company holds no excess cash on hand. Miltons free cash flow one year from now is expected to be 10 million and will grow from there on. The risk free rate is 4% and the market risk premium is 6%.
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What is the cost of equity?
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What is the cost of debt? Explain
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What is the WACC?
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Given WACC, what g is consistent with the $6 price per share
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