Question
Rollins Corporation is estimating its WACC. Its current and target capital structure is 40 percent debt and 60 percent common equity. Its bonds have a
Rollins Corporation is estimating its WACC. Its current and target capital structure is 40 percent debt and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,040. Rollins' beta is 1.2, and the risk-free rate is 10 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00. Its stock sells for $27.00 per share, and has a growth rate of 8 percent. The firm's marginal tax rate is 40 percent.
(Show all work) What is Rollins' cost of common stock (also known as rs or ks)?
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