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Please help me . Please safe me . I will give good upvote . Please safe. In the spring of last year, QM Industries' management
Please help me . Please safe me . I will give good upvote . Please safe.
In the spring of last year, QM Industries' management is evaluating the purchase of a new plant. To finance the purchase, QM would offer 20-year bonds with a par value of RM1,000 and an interest rate of 6% per year, paid semiannually, at a price of RM1,020. Preferred stock with a dividend of RM2.50 can be sold for RM35. QM's common stock is currently trading at RM50 per share. The firm paid a RM4 dividend last year and expects dividends to grow at a rate of 4% per year in perpetuity. The firm is currently financing its assets with debt, preferred stock and common stock worth RM300,000, RM200,000 and RM500,000, respectively. The firm's marginal tax rate is 34%. (1) What discount rate should QM use to evaluate this new project? (ii) Describe the two approaches that can be taken to estimate the cost of common equityStep by Step Solution
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