Question
You have been provided with the following information about Company X which pays tax at 30%: Common shares There are 2 million shares outstanding. The
You have been provided with the following information about Company X which pays tax at 30%:
Common shares There are 2 million shares outstanding. The current market price of the shares is $53.20 each. The shares paid a dividend of $2.70 per share last year and investment analysists believe the dividends should grow at an average annual rate of 7% for the foreseeable future. Flotation costs are estimated at 6%.
Preference shares There are 1.5 million preference shares outstanding. The shares carry a stated dividend of $1.60 per share and have a current market price of $22 per share. Flotation costs are estimated at 5%
Bonds the company has 30,000 bonds with a face value of $100 each and a coupon rate of 6% with interest paid semi-annually. The current price of the bonds is $92.89, and they have 10 years to maturity. Flotation costs for debt is estimated at 4%
Required: Calculate the companys weighted average cost of capital. (Use 4 decimal places when calculating rates)
Need answer ASAP please, TIA
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