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Growth Company's current share price is $20 and is expected to pay a $1 dividend per share next year. After that, the firm's dividends are
Growth Company's current share price is $20 and is expected to pay a $1 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4% per year. 1) What is an estimate of Growth Company's cost of equity? 2) Growth Company also has preferred stock outstanding that pays a $2 per share fixed dividend. If this stock is currently priced at $28, what is Growth Company's cost of preferred stock? 3) Growth Company has existing debt issued three years ago with a coupon rate of 6%. The firm just issued new debt at par with a coupon rate of 6.5%. What is Growth Company's cost of debt? 4) Growth Company has 5 million common shares outstanding and 1 million preferred shares outstanding, and its equity has a total book value of $50 million. Its liabilities have a market value of $20 million. If Growth Company's common and preferred shares are priced at $20 and $28, respectively, what is the market value of Growth Company's assets? 5) Growth Company fates a 35% tax rate. Given the information in parts 1-4, and your answers to those problems, what is Growth Company's WACC
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