22 Jul WHAT IS THIS FIRMS COST OF PREFERRED STOCK?
Growth rate of dividends and Show more Using the information provided below answer the questions that follow. Growth rate of dividends and common stock share price = 4% Interest rate = 6% Risk free rate of return = 5% Return on the market = 12% Tax bracket = 40% Dividend on common stock (past year) = $3 Dividend on preferred stock = $4 Price per share of common stock = $30 Price per share of preferred stock = $100 Beta = 1.3. Assume that items in the balance sheet below are in the desired proportion. (The current capital structure is the target capital structure.) _________________________________________________ Assets $100000000 Long -term debt $45000000 Preferred stock $10000000 Common stock $30000000 Retained earnings $15000000 a.) What is this firms after tax cost of debt? b.) What is this firms cost of preferred stock? c.) What is this firms cost of common stock using the dividend growth model (Gordons model)? d.) What is this firms cost of common stock using the CAPM model? e.) What is this firms WACC using CAPM for cost of equity? f.) What is the firms WACC using the dividend growth model? Show less
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