Problem (CH13): Rickenbacker Guitar Company has the following capital structure: 30% debt, 10% preferred stock, 60% equity. The company has a beta of 1.2. The risk free rate is 2.7% and the market risk premium is 4.3%. The expected return on the market is 7.0%. The company has a bond issue outstanding. The par value of the bond is $1000 and it is currently priced at $1015. The bonds pay a 5.6% semiannual coupon and have 30 years to maturity. The corporate tax rate is 40%. The companys preferred shares pay a dividend of $1 and are currently priced at $12.

How would it change if you were given that the companys current stock price is $20 and it will pay a dividend of $1.25 and grow it thereafter at a constant rate of 3% - instead of beta, risk free rate and market risk premium (CAPM) information?