Growth Company's current share price is $$20\mathrm{.}15$ and it is expected to

pay a $$1\mathrm{.}10$ dividend per share next year. After that, the firm's dividends

are expected to grow at a rate of $3\mathrm{.}7\%$ 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

$$1\mathrm{.}95$ per share fixed dividend. If this stock is currently priced at

$$27\mathrm{.}90,$ what is Growth Company's cost of preferred stock?

c$.$ Growth Company has existing debt issued three years ago with a

coupon rate of $6\mathrm{.}2\%.$ The firm just issued new debt at par with a coupon

rate of $6\mathrm{.}3\%.$ What is Growth Company's pretax cost of debt?

d$.$ Growth Company has $5\mathrm{.}3$ million common shares outstanding and

$1\mathrm{.}4$ million preferred shares outstanding, and its equity has a total book

value of $$49\mathrm{.}9$ million. Its liabilities have a market value of $$19\mathrm{.}7$ million.

If Growth Company's common and preferred shares are priced as in

parts $($a$)$ and $($b$),$ what is the market value of Growth Company's

assets?

e$.$ Growth Company faces a $22\%$ 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.