- Common Stock 265 000 Shares Of Common Stock Selling For 76 Per Share The Stock Has A Beta Of 0 92 And Will Pay A Divi 1 (85.81 KiB) Viewed 31 times
CAPM?
2. What is the firm’s cost of equity according to the
dividend discount model?
3. What is the cost of preferred stock?
4. What is the pre-tax cost of debt?
5.What is the percentage of debt financing (D/V)?
6.What is the weighted average cost of capital (WACC)? For the
cost of equity, use the average required return from the CAPM and
the dividend discount model.
Common stock: 265,000 shares of common stock selling for $76 per share. The stock has a beta of 0.92 and will pay a dividend of $2.48 next year. The dividend is expected to grow by 4 percent per year indefinitely. The risk free rate is 4.5%, and the market risk premium is 8.7% Preferred stock: 7,500 shares of preferred stock selling at $88 per share and paying a $6 dividend per share. Debt: 8,500 bonds outstanding, with 7.1 percent semiannual coupon rate, $1000 par value, 14 years to maturity, selling for 102.6 percent of par. The corporate tax rate is 34 percent. Round your answers to two significant digits.