Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The following information applies to Metflix Inc: The company's current share price is $24 and it is expected to pay a $3 dividend per share
The following information applies to Metflix Inc: The company's current share price is $24 and it is expected to pay a $3 dividend per share next year. After that, the company's dividends are expected to grow at a rate of 3.0% per year indefinitely. The company also has preference shares outstanding that pay a $5 fixed dividend. This share is currently priced at $38. The company has 5 million ordinary shares outstanding, and 1 million preference shares outstanding, and its equity has a total book value of $50 million. Its liabilities have a market value of $25 million. Existing debt issued three years ago has a coupon rate of 5.8%. The company just issued new debt with a coupon rate as well as a yield of 6.7%. The company faces a tax rate of 30%. a) What is an estimate of the company's cost of equity? (Round to 2 decimal places) % b) What is the company's cost of preference shares? (Round to 2 decimal places) % c) What is the company's pre-tax cost of debt? (Round to 2 decimal places) % d) What is the market value of the company's assets? (Round to 2 decimal places) million dollars e) What is the company's WACC? (Round to 2 decimal places) %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started