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Assume that you have been hired as a consultant by Gustav Foods, a major producer of cat food, treats, toys and litter, to estimate the
Assume that you have been hired as a consultant by Gustav Foods, a major producer of cat food, treats, toys and litter, to estimate the firm's weighted average cost of capital. They have provided you the following information:
- Common stock currently sells for $49.00 per share, the company expects to pay a dividend of $3.40, and its expected constant growth rate is 6.00%. The stock has a beta of 1.50. The balance sheet shows that the company has 10 million shares of stock.
Given that this is all the information you have, what is the cost of equity you will use in your calculations?
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