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please help me with this question! 1. Aminah & c0 use only dobt and equity. It can borrow unlimited amounts at a rate of 10%
please help me with this question!
1. Aminah \& c0 use only dobt and equity. It can borrow unlimited amounts at a rate of 10% as long as it finances at its target capital structure which is as follows: Overall market risk premium is expected to be 6%. Company promises to pay fixed dividends of $6 on its preferred stock, while current price of preferred stock is $50.US T-bills are offering 4.4% return.Company's common stock can grow at a constant rate of 8%, dividend paid last year was $1.5 on its common stock. Its marginal tax rate is 40%, according to analyst's expectations beta is 1.5 Calculate the Weighted Average Cost of Capital for Aminah \& co. (b) Assuming the cost of each component i.e. (debt, and common stock) same as part (a) but no preferred stock included, calculate WACC if its target capital structure consists of 30% debt and 70% common equity. (2) Profit maximization should be a Long-term goal or Short-term goal. Under what conditions Profit Maximization might not lead to Shareholders Wealth Maximization. (8)Step by Step Solution
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