Question
Domino's Pizza Enterprises Limited (DMP) is a publicly listed company that engages in the operation of retail food outlets and franchise service in Australia. The
Domino's Pizza Enterprises Limited (DMP) is a publicly listed company that engages in the operation of retail food outlets and franchise service in Australia. The current share price of DMP is $54.30 per share. DMP has 87 million shares outstanding, $1,400 million in debt, and $77 million in cash. DMP plans to pay $1.70 per share in dividends in the coming year and the dividends are expected to grow by 4% per year in the future. DMP's long-term debt consists of bonds issued with a face value of $55 million with 10 years to maturity with annual coupon rate of 7% (APR). The long-term bonds are currently trading at par value. The corporate tax rate is 30% (6 marks) A. What is the DMP's cost of equity? What is the associated dividend yield and capital gain yield? B. What is the DMP's after-tax cost of debt?
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