Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Rollins' beta

Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Rollins' beta is 1.4 , the risk-free rate is 5 percent, and the market risk premium is 6 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00, sells for $ 34 per share, and has a growth rate of 5 percent. The firm's policy is to use a risk premium of 5 percentage points when using the bond-yield-plus-risk-premium method to find rs. The firm's marginal tax rate is 40 percent. What is Rollins cost of equity when using the CAPM approach? Express your answer in percentage (without the % sign) and round it to two decimal places.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Alternative Assets

Authors: Mark J. P. Anson

2nd Edition

047198020X, 978-0471980209

More Books

Students also viewed these Finance questions

Question

=+ (a) Show that D is finitely but not countably additive on 9.

Answered: 1 week ago