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I need help with part E please Growth Company's current share price is $20.25 and it is expected to pay a $1.30 dividend per share
I need help with part E please
Growth Company's current share price is $20.25 and it is expected to pay a $1.30 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 3.5% 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 $2.30 per share fixed dividend. If this stock is currently priced at $28.30, what is Growth Company's cost of preferred stock? c. Growth Company has existing debt issued three years ago with a coupon rate of 6.2%. The firm just issued new debt at par with a coupon rate of 6.8%. What is Growth Company's cost of debt? d. Growth Company has 4.9 million common shares outstanding and 1.2 million preferred shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value of $19.9 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. 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? The weighted average cost of capital is 8.86 %. (Round to two decimal places.)Step by Step Solution
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