Question
Cost of Capital Epsilon Companys last annual dividend was $4 per share, and both earnings and dividends are expected to grow at a constant rate
Cost of Capital
Epsilon Companys last annual dividend was $4 per share, and both earnings and dividends are expected to grow at a constant rate of 8%. The stock now sells for $50 per share. The companys beta coefficient is 1.5. The return of a market portfolio is 12%, and the risk-free rate is 8%. The companys A-rated bonds are yielding 8%. Epsilon Companys has Debt to Equity ratio 140%.
Calculate cost of debt if corporate tax is 25%?
Calculate the cost of equity using (a) the capital asset pricing model and the dividend discount model?
What is the weighted average cost of capital?
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