Question
Growth Company's current share price is $ 19.90 , and it is expected to pay a 1.20 dividend per share next year. After that, the
Growth Company's current share price is $ 19.90 , and it is expected to pay a 1.20 dividend per share next year. After that, the fim's dividends are expected to grow at a rate of 4.3% per year. a. What is an estimate of Growth Company's cost of equity ? b . Growth Company also has preferred stock outstanding that pays a $ 2.30 per share fixed dividend . If this stock is currently priced at $ 28.30 , what is Growth Company's cost of preferred stock ? c. Growth Company has existing debt issued three years ago with a coupon rate of 5.7% . The firm just issued new debt at par with a coupon rate of 6.2% . What is Growth Company's cost of debt ? d. Growth Company has 5.2 million common shares outstanding and 1.1 million preferred shares outstanding , and its equity has a total book value of $ 49.9 million . Its liabilities have a market value of $20.3 million . If Growth Company's common and preferred shares are priced at $19 and $28.30 , respectively , what is the market value of Growth Company's assets ? e. Growth Company faces a 40% tax rate . Given the information in parts a through d and your answers to those problems , what is Growth Company's WACC ? Note: Assume that the firm will always be able to utilize its full interest tax shield .
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