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Please do H part, I know till part G. Don't know how to calculate Weights. Please, help me with the calculation of Weights for part
Please do H part, I know till part G. Don't know how to calculate Weights. Please, help me with the calculation of Weights for part H.
1. Kristen Technologies is considering a major expansion program that has been proposed by the company's information technology group. Before proceeding with the expansion, the company must estimate its cost of capital. Assume that you are an assistant to Jerry Lehman, the financial vice president. Your first task is to estimate Kristen's cost of capital. Lehman has provided you with the following data, which he believes may be relevant to your task. The firm's tax rate is 40%. The current price of Kristen's 8% coupon, semiannual payment, noncallable bonds with 10 years remaining to maturity is $875.378. The current price of the firm's 10%, $30 par value, quarterly dividend, perpetual preferred stock is $33.33. Kristen's common stock is currently selling for $45.00 per share. Its last dividend was $3.81, and dividends are expected to grow at a constant rate of 4% in the foreseeable future. Kristen's beta is 1.44, the yield on T-bonds is 6%, and the market risk premium is estimated to be 5%. For the bond-yield-plus-risk premium approach, the firm uses a risk premium of 3%. The value of Kristen's current bonds is $3,000,000, it has 30,003 preferred shares outstanding, and the total number of common shares trading in the market are 133,333. What is the market interest rate on Kristen's debt and its component cost of debt? What is the firm's cost of preferred stock? What is Kristen's estimated cost of common equity using the CAPM approach? d. What is the estimated cost of common equity using the DCF approach? e. What is the bond-yield-plus-risk-premium estimate for Kristen's cost of common equity? f What is your final estimate for ts? g. Kristen estimates that if it issues new common stock, the flotation cost will be 15%. Kristen incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost? What is Kristen's overall, or weighted average, cost of capital (WACC)? Ignore flotation costs. a. b. c. hStep by Step Solution
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