Question
Suppose Al Falah Inc. uses only debt and Common equity to finance its capital budget and uses CAPM to compute its cost of equity. The
Suppose Al Falah Inc. uses only debt and Common equity to finance its capital budget and uses CAPM to compute its cost of equity. The capital structure is 75% debt and 25% Common equity. Before tax cost of debt is 12.5 % and tax rate is 20%. Risk free rate is rRF = 6%, Beta is 1.67 and market risk premium (rm- rRF ) = 8%: what is your estimation of the company's WACC
Rahaf Capitals Ltd has outstanding bonds with a YTM of 11.25%. They are in the 20% tax bracket. They wish to maintain a capital structure of 35% debt, 10% preferred stock and 55% common equity. Rahaf can sell preferred shares for $110 that will pay an annual dividend of $12. Common shares currently sell for $35 and recently paid a per share dividend of $1.20. This dividend is expected to grow at a constant 8%. What is the WACC
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