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PROBLEM 1: The Green Company has common stock outstanding that has a current price of $19.88 per share and a $1.50 current dividend (D.) per
PROBLEM 1: The Green Company has common stock outstanding that has a current price of $19.88 per share and a $1.50 current dividend (D.) per share. Green's dividends are expected to grow at a constant rate of 6% per year, forever. The expected risk-free rate of interest is 2.5%, whereas the expected market rate of return is 12.5%. The beta on Green's stock is 1.15. a. What is the cost of equity for Green Co. using the dividend growth valuation model? b. What is the cost of equity for Green Co. using the capital asset pricing model?(CAPM) c. Number of shares of common stock outstanding: #5,000,000 d. The firm's outstanding bonds have ten years to maturity, a total face value of debt is $50 million, face value per bond of $1,000, current price is $941 with a coupon rate of 10%. Interest is paid annually. What is the yield to maturity (YTM) on the bond? f. the tax rate is 24% Using data given above; calculate the WACC for the firm. [Hint: Use market value proportions to calculate WACC]
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