Answer the following all part of one question

4. You are a financial manager of a firm and are asked to assess the cost of capital of your firm.

You know that Your firm is going to pay dividend $1 per share in the next year.

The current stock price is $10 per share

Firm beta is 20% higher than market average

Constant growth rate is 3%

Expected market return is 12% and risk free rate is 2%

There is totally 10 million of outstanding shares of stocks, and for each dollar equity,

firm issued $1.5 debt

Cost of borrowing/issuing bond is 5%

Corporate tax rate 30%

a.

What is the cost of equity (common stock) using the dividend growth model?

b. What is the cost of equity (common stock) using the CAPM model

c.

What is the total value of the stock? What is the total value of the bond? What is the total value of the

firm?

d. What is the WACC for your firm using the cost of equity from CAPM?