25 Jul CALCULATE ANDERSON ENTERPRISES COST OF RETAINED EARNINGS.
Anderson Enterprises Inc. has determined its optimal capital structure which is composed of the fo Show more Anderson Enterprises Inc. has determined its optimal capital structure which is composed of the following sources and target market value proportions: Source of Capital: Target Market Proportions: Long-Term Debt 60% Common Stock Equity 40% The pre-tax interest rate on new $2000 par value bonds that Anderson Enterprises may issue is 8%. The firms common stock is currently selling for $74.00 per share. The dividend expected to be paid at the end of the coming year (D1) is $5.00. The firms dividend payments have been growing at a constant rate of 3% for the last five years The firms marginal tax rate is 40%. a. Calculate Anderson Enterprises after-tax cost of debt financing. b. Calculate Anderson Enterprises cost of retained earnings. c. Assume that Anderson Enterprises plans to finance a warehouse expansion utilizing retained earnings together with debt financing in the target capital structure proportions provided in the chart above. Calculate Anderson Enterprises a Weighted Average Cost of Capital (WACC). Show less
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