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hello I have assignment in finance can you help on that ? Suppose you are given the following data of a public firm with the
hello I have assignment in finance can you help on that ?
- Suppose you are given the following data of a public firm with the following assets:
- The firm has an outstanding bond with 5 years of remaining maturity, pays 10% coupon, semiannually. The bond is noncallable and is currently traded for 1,300. The bond has a face value of 1000.New bonds will be privately placed with no flotation cost.
- The firm operates in a country where tax rate =30%.
- The firm has outstanding preferred stock that pays 10%, 100 par value, quarterly dividend, perpetual preferred stock sells for 113.
- The firm also has common stock currently traded for 100 per share and pays dividend per share (D0) = 3.5 and dividend is growing by 10% per annum. The firm's beta (b) = 1.4; risk-free rate (rRF) = 6%; market risk premium (RPM) = 8%.
- The firm has long-term and steady capital structure policy as follows:40% debt, 10% preferred, 50% common equity.
Task: Compute the cost of each asset and construct the weighted average cost of capital for the underlined firm.
- Assume the growth of rate dividend payment of a stock is constant at 8%. The stock currently pays 5.00 per share and its required rate of return is 14%. And the risk free rate of return is 6%. Assume you have 50, 000 in your bank account that you are contemplating to invest into this stock.
Task: What would be your total rate of return in three years from this stock? Show all your computations?
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