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The Giant Ltd. has 10 million shares of common stock outstanding. The current share price is $61. It has just issued a dividend of $3
The Giant Ltd. has 10 million shares of common stock outstanding. The current share price is $61. It has just issued a dividend of $3 per share on its common stock. The company is expected to maintain a constant 5% growth rate in its dividends indefinitely. The company also has an issue of 2.8 million shares of preferred stock with a $5 stated dividend. The current preferred stock price is $90 per share. Moreover, the company has 700,000 bonds outstanding, $1,000 par value. the bonds are selling for 90% of par. Bonds with similar characteristics are yielding 4.5%. Giant Ltd.'s tax rate is 30%. a) What is the firm's cost of common stock? What is the cost of preferred stock? What is the pre-tax cost of debt? (2 marks) (2 marks) (2 marks) (2 marks) (4 marks) b) What is the capital structure weights for each of three financing methods? c) What is the firm weighted average cost of capital
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