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The answers were given to me: a) Cost of equity = 9.77% b) Cost of debt = 10.54% c) WACC = 7.70% I need help
The answers were given to me:
a) Cost of equity = 9.77%
b) Cost of debt = 10.54%
c) WACC = 7.70%
I need help in breaking down the formulas towards finding these answers to help further understand please.
Thank you
Question 1 Gangnam Style has just paid a dividend of $1.00 per share on their common shares. It is expected that dividends on its common shares will grow at 5% indefinitely. The stock is currently selling at $22 per share and its beta is 1.2. Gangnam's new bonds pay semi-annual coupons with a 10% coupon rate, have 20 years to maturity, have $1000 face value and have a quoted price of 95.5%. The company's tax rate is 40% and its target debt-to-equity ratio is equal to 1.5. a) What is the company's cost of equity? b) What is the company's cost of debt? c) What is the company's cost of capital
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