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Growth Company's current share price is $19.95 and it is expected to pay a $0.85 dividend per share next year. After that, the firm's dividends
Growth Company's current share price is $19.95 and it is expected to pay a $0.85 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 3.9% per year. a. What is an estimate of Growth Company's cost of equity? b. Growth Company also has preference shares outstanding that pay a $2.00 fixed dividend. If these shares are currently priced at $28.25, what is Growth Company's cost of preference shares? c. Growth Company has existing debt issued three years ago with a coupon rate of 5.8%. The firm just issued new debt at par with a coupon rate of 6.4%. What is Growth Company's pre-tax cost of debt? d. Growth Company has 5.4 million ordinary shares outstanding and 1.5 million preference shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value of $19.6 million. If Growth Company's ordinary and preference shares are priced as in parts a and b, what is the market value of Growth Company's assets? e. Growth Company faces a 38\% tax rate. Given the information in parts a-d, and your answers to those problems, what is Growth Company's WACC
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