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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

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 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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