Question
Hi there, can you help me this question please 1.Company A's capital structure contains 30% debt and 70% equity, whereas Company B's capital structure contains
Hi there, can you help me this question please
1.Company A's capital structure contains 30% debt and 70% equity, whereas Company B's capital structure contains 40% debt and 60% equity. Both companies pay 10% interest rate on their debt.
The shares of company A have a beta 1.3and the shares of company B have a beta 1.2, the risk-free rate on the economy is3%and the expected return on the market is9%.
Using the above information, calculate the following:
a.Cost of equity for Company A and Company B.
b.WACC for company A.
c.WACC for company B.
Tax rate of 30%
2.Jim Ltd.'s next dividend will be $4, the dividend is expected to grow at 8% p.a., for the following 4 years. After that the growth rate in dividends will be 4% per year indefinitely. Required rate of return is 10% p.a.
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