Question
PLS ANSWER ASAP! Will upvote! Thank you! For WACC: StarCafe Corporation is reviewing the cost of equity and the WACC it uses to evaluate new
For WACC:
StarCafe Corporation is reviewing the cost of equity and the WACC it uses to evaluate new investment projects. Management has collected the following information as of September 30, 2001:
Current Cost of Bond - Debt | 14.98% | Current EPS | $14 |
Coupon Interest Rate on Bond-Debt (10 yrs to maturity) | 12% @ $1000 par per unit | Dividend Payout Ratio based on Earnings | 25% |
Company beta | 1.25 | ||
Tax Rate | 40% | Outstanding Units of Bond-Debt | 700 |
Long Term Govt Bond Rate | 5% | Outstanding Preferred Stock Shares | 1,000 |
Market Risk Premium | 6.9% | Outstanding Common Stock Shares | 10,000 |
Preferred Stock Dividend | 9% @ $100 par | Common Stock Par Value | $5 |
Estimated Growth Rate | 7% | Preferred Stock Mkt. Value | $90/share |
Common Stock Mkt. Value | $55/ share | New Stock Floatation Cost | 12% |
Compute the WACC of Star Cafe if no new equity will be issued and if new equity will need to be issued.
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