The Ramirez Company's last dividend was $2.85. Its dividend growth rate is expected to be constant at 10% for 2 years, after which dividends are
The Ramirez Company's last dividend was $2.85. Its dividend growth rate is expected to be constant at 10% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price? Do not round intermediate calculations.
Sapp Trucking's balance sheet shows a total of noncallable $60 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $65 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $85 million. The current stock price is $18.00 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 25%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs?