Question
At 2020 AAB Construction has a face debt value of [2+20]M trading at [70+9+1]% with a pre-tax weighted cost of [1+3]%. AAB common equity for
At 2020 AAB Construction has a face debt value of [2+20]M trading at [70+9+1]% with a pre-tax weighted cost of [1+3]%. AAB common equity for the year was valued at [6+20+2]M and preferred equity for [2+9]M. AAB Construction issues preferred dividends at an annual rate of $6. Its current preferred stock price is $[9+2+20]. Assume that the equity beta for AAB Construction is [(2+9+2)/10]. The Yield on 10-year treasuries is 4%, and that the market risk premium for the year is 12%. The company's EPS expected growth is [(2/2)+2]%. For this year, the dividends for AAB Construction are the same for common and preferred stock; additionally, the price for common stock is $[9+25].
If the tax rate is [2+9+20]%,
a) What is AAB Construction WACC if CAPM is used
b) What is AAB Construction WACC if CDGM is used
NOTE: Answer in percentages. If your answer is 0.0405, then answer 4.05
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started