Question
Q6.ABC Motors has a target capital structure of 50% debt and the remaining weight on common equity, with no preferred stock. The after-tax required rate
Q6.ABC Motors has a target capital structure of 50% debt and the remaining weight on common equity, with no preferred stock. The after-tax required rate of debt is 7%, and its tax rate is 35%. ABCs CFO estimates that the companys WACC is 13%. What is the ABCs cost of common equity? ( hint: 1. ; 2. You will need WACC formula)
Q8)
If D0 = $1.75, g (which is constant) = 5%, and P0 = $40.00, what is the stocks expected total return for the coming year?
Q9. ABCs stock currently sells for $40/share. It just paid a dividend of $1.75/share. The dividend is expected to grow at a constant rate of 10% a year. What is the stock price at time 1?
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