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3) Calculate Duchess Corporation's cost of capital. (a) If the market price of the company's common stock is $40, the company paid a dividend (Di)
3) Calculate Duchess Corporation's cost of capital. (a) If the market price of the company's common stock is $40, the company paid a dividend (Di) of $1.26 per share, and dividends are expected to grow at a rate of 6% per year for the foreseable future, what is the company's cost of retained earnings? (5 pts) (b) Assume that the company can issue a $2 dividend preferred stock for a market price of $25 per share, with flotation costs equal to $3, what is the cost of preferred stock? (5 pts) (c) What is the WACC (weighted average cost of capital) if the capital structure of the company includes 30% preferred stock and 70% retained earnings? (5 pts)
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