Question
You are asked to create a scenario to ultimately calculate the WACC of an imaginary company. For this purpose you first need to decide on
You are asked to create a scenario to ultimately calculate the WACC of an imaginary company. For this purpose you first need to decide on the current liabilities, long-term debt and stockholders equity in the balance sheet of an imaginary company. After this initial step, you need to decide on all other needed numbers for the calculation of the costs of different types of capitals and WACC. Upon the construction of the scenario, you are expected to achieve the following points: - Using the numbers in your scenario, you are expected to calculate the cost of debt, cost of preferred equity, cost of retained earnings, cost of new common stock and WACC of your imaginary company as we did during the lectures. - While calculating the cost of common equity you need to use both Dividend Growth Model and CAPM. While calculating the WACC, you need to let me know which techniques result is used and why.
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