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(4 points) Given the following information: Your firm is going to pay dividend $2 per share in the next year. The current stock price is
(4 points) Given the following information: Your firm is going to pay dividend $2 per share in the next year. The current stock price is $20 per share Firm beta is equivalent to market average Constant growth rate is 5% Expected market return is 12% and risk free rate is 2% Market value of common stock is $ 100 million and market value of debt is $100 million No preferred stock Cost of borrowing/issuing bond is 5% Corporate tax rate 30% a. What is the cost of equity using dividend growth model? b. What is the cost of equity using CAPM model C. What is the weights for common stock and debt? d. What is the WACC for your firm using cost of equity from CAPM
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