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Answer plz Al Ain Mineral LLC wants to calculate the component costs in its capital structure Company's shares are priced at AED 27, and is
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Al Ain Mineral LLC wants to calculate the component costs in its capital structure Company's shares are priced at AED 27, and is expected to pay a dividend of AED 0.50 Company's dividend growth rate is 8%, and flotation cost is AED1.25. Preferred stock the company sells for AED46, pays a dividend of AED5.00, and carries a flotation costo AED 1.10. The company bonds yield 9% in the market. Supposing the company's tax rate to be in the bracket of 34%. (a) Calculate cost of debt, cost of common stock, and cost of preferred stock. 16 Marts) (b) Suppose Al Ain Mineral's capital structure consists of debt (25%), preferred stock (25%) and equity (50%), what would be company's weighted average cost of capital? (2 Marks) (c) Why do finance professionals use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)? (2 Marks)Step by Step Solution
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