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Problem 4 Assume the following: T-Bill rate = 1%, Market Risk Premium = 9%, Tax rate = 20%, Beta = 2 Stock Price = $82/per
Problem 4 Assume the following: T-Bill rate = 1%, Market Risk Premium = 9%, Tax rate = 20%, Beta = 2 Stock Price = $82/per share Current Dividend = $2.75 (growth rate = 5%) Shares outstanding 100 million. Total bonds =10.526 million bonds. Price of each bond = 950 Cost of Debt = 5.15%. (a): Find the cost of equity using CAMP and the dividend growth model. Calculate their average. (b): Calculate the capital structure weights (c): Calculate the WACC
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