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How so I solve this? On January 1 , the total morket value of the Jysseland Compary was $60 million, During the year, the compeny
How so I solve this?
On January 1 , the total morket value of the Jysseland Compary was $60 million, During the year, the compeny plans to raise and invest 520 milion in new projects. The firm's precont market value coptal structure, here below, is considered to be optimal. There is no short. term debt: New bonds will have a 7% coupon rate, and they will be sold at par. Common stock is currently selling at 530 a share. The stockhiders? required rate of return is estomated to be 12%, consisting of o dividend yeld of 4% and an expected constant growth rate of 8%. (The next expected dividend is $120, so the dividend vield is $1:20/530=45.) The marginal tax rate is 25%. a. In order to maintain the present copital structure, how much of the new investment must be financed by common equity? Round your answer to the nearest dollar: $ b. Assuming there is sufficient cash flow for Tysselend to maintan its terget capital structure without issuing odditional shares of equity, what is its WACC? Round your answer to two decimal places. = c. Suppose now that there is not enough internal cash flow and the firm must issue new shares of stock. Qualitatively speaking, what will happen to the WACC? 8 . numbers are required to answer this question. I. ry and the WACC will increase due to the flotation costs of new equity. II. FI and the WACC will decrease due to the flotation costs of new equity. III. fs will increase and the WACC will decrease due to the flotabon costs of new equity. rV. rx will decrease and the WACC will increase due to the flototion costs of new equity. V,rb and the WACC will not be affected by flotation costs of new equity Step by Step Solution
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