Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. abc has estimated the after-tax costs of debt and

ABC has estimated the after-tax costs of debt and equity capital for various proportions of debt...

70.2K

Verified Solution

Question

Finance

ABC has estimated the after-tax costs of debt and equitycapital for various proportions of debt in its capital structure(debt + equity):

% of Debt Cost of Debt. Cost of Equity
35. 5,4% 13,8%
40. 5,6. 14
45. 5,9. 14,3
50. 6,4. 14,7

If ABC pays a current dividend of $1.00 and expects dividendsto grow at a constant rate of 7%, what is ABC’s stock price if itobtains its optimal capital structure?

Answer & Explanation Solved by verified expert
4.3 Ratings (865 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

ABC has estimated the after-tax costs of debt and equitycapital for various proportions of debt in its capital structure(debt + equity):% of Debt Cost of Debt. Cost of Equity35. 5,4% 13,8%40. 5,6. 1445. 5,9. 14,350. 6,4. 14,7If ABC pays a current dividend of $1.00 and expects dividendsto grow at a constant rate of 7%, what is ABC’s stock price if itobtains its optimal capital structure?

Other questions asked by students

Finance
1.2K views

Please describe how changes in capital structure affect the value of the firm in a world...

Operations Management
1.2K views

Scenario Janet is the newly appointed HR Representative with Global Plastics, Inc. This organization operates in the United...

Biology
1.2K views

hy are they fighting View of Andrew Jackson supports Election of 1828 Jackson vs Quincy...

Basic Math
1.2K views

A croissant, a cup of coffee, and a fruit bowl from Kelley's Coffee Cart cost...

Calculus
1.2K views

Determine whether the following vector field is conservative on R F 2y 2x 2y Is...

Accounting
1.2K views

Here is the data for Breakers, Inc. for the year 2019 Kindly answer 3,4 &...

Accounting
1.2K views

Calculate the ending balances on the company's balance sheet on January 31st. (Hint: Be sure...

Accounting
1.2K views

read requirements pls The following is a partially...

Accounting
1.2K views

A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated...

Accounting
1.2K views

The external auditor rarely relies on the work of the internal auditor because having worked...

Finance
1.2K views

P6-13 (similar to) Question Help (Annuity number of periods) How long will it take to...

Accounting
1.2K views

Primare Corporation has provided the following data concerning last months manufacturing operations. ...