Question
Victoria company's current EPS (Earnings per share) is $6.50. It was $4.42 five years ago. The company pays out 40 % of its earnings
Victoria company's current EPS (Earnings per share) is $6.50. It was $4.42 five years ago. The company pays out 40 % of its earnings as dividends and its stock sells for $36. 1. Calculate the annual growth rate of EPS over the past 5 years. 2. Calculate next year's dividend per share, D1. (Hint: D0= 40 % of current EPS) 3. What is Victoria's cost of equity? 4. Victoria has a 6 % coupon rate, semi-annual payment, and a $1000 par value that matures in 30 years and sells at a price of $515.16. Victoria's total tax rate is 25 %. What is Victoria's cost of debt? 5. If Victoria uses a capital structure of 60 % equity and 40 % debt, what is the Victoria's cost of capital?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
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