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Question d and e only please Growth Company's current share price is $19.85 and it is expected to pay a $0.90 dividend per share next
Question d and e only please
Growth Company's current share price is $19.85 and it is expected to pay a $0.90 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.2% per year. a. What is an estimate of Growth Company's cost of equity? b. Growth Company also has preferred stock outstanding that pays a $1.90 per share fixed dividend. If this stock is currently priced at $28.30, what is Growth Company's cost of preferred stock? c. Growth Company has existing debt issued three years ago with a coupon rate of 6.5%. The firm just issued new debt at par with a coupon rate of 6.1%. What is Growth Company's cost of debt? d. Growth Company has 4.8 million common shares outstanding and 1.3 million preferred shares outstanding, and its equity has a total book value of $49.9 million. Its liabilities have a market value of $20.4 million. If Growth Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Growth Company's assets? e. Growth Company faces a 40% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Growth Company's WACC? Note: Assume that the firm will always be able to utilize its full interest tax shieldStep by Step Solution
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