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The Dempere Imports Companys EPS in 2011 was $3.00, and in 2006 it was $1.80. The companys payout ratio is 30%, and the stock is
The Dempere Imports Companys EPS in 2011 was $3.00, and in 2006 it was $1.80. The companys payout ratio is 30%, and the stock is currently valued at $41.50. Flotation costs for new equity will be 7%. Net income in 2012 is expected to be $15 million. The market-value weights of the firms debt and equity are 40% and 60%, respectively. a)Based on the five-year track record, what is Demperes EPS growth rate? What will the dividend be in 2012? b)Calculate the firms cost of retained earnings and the cost of new common equity. c) caclulate the break-point associated with retained earnings. d)If Demperes after-tax cost of debt is 6%, what is the WACC with retained earnings? With new common equity
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