Question
Sigma Company has the following capital structure: 35% debt, 20% preferred stock and 45% common stock. The firm's 12-year 8% annual coupon bonds
Sigma Company has the following capital structure:
35% debt, 20% preferred stock and 45% common stock.
The firm's 12-year 8% annual coupon bonds is currently trading at $765.50
The firm's 12% annual dividend perpetual preferred stock with a par value of $100 is trading at $68.50
Their common stock is trading at $60. Their next dividend is expected to be $4.25. The growth rate is forecasted at 10%.
The risk-free rate is 8%, the beta of the stock is 1.3 and the market risk premium (Rm - Rf) is 12%.
What is the new WACC if you take the average of the CAPM and dividend growth models to estimate the cost of equity. Assume a tax rate of 40%
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To calculate the Weighted Average Cost of Capital WACC using the average of the CAPM and dividend gr...
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
