Growth? Company's current share price is $ 20.15and it is expected to pay a $ 1.15...

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Growth? Company's current share price is $ 20.15and it isexpected to pay a $ 1.15 dividend per share next year. After? that,the?firm's dividends are expected to grow at a rate of 3.9 % peryear.
a. What is an estimate of Growth?Company's cost of? equity?
b. Growth Company also has preferred stock outstanding that paysa $ 2.25 per share fixed dividend. If this stock is currentlypriced at $ 27.95 what is Growth?Company's cost of preferred?stock?
c. Growth Company has existing debt issued three years ago witha coupon rate of 5.9 % The firm just issued new debt at par with acoupon rate of 6.1 % What is Growth? Company's cost of? debt?
d. Growth Company has 4.8million common shares outstanding and1.3million preferred shares? outstanding, and its equity has atotal book value of $ 50.0million. Its liabilities have a marketvalue of $20.2million. If Growth? Company's common and preferredshares are priced as in parts?(a?)and ?(b?),what is the marketvalue of Growth?Company's assets?
e. Growth Company faces a35 % tax rate. Given the information inparts (a?)through?(d?),and your answers to those? problems, what isGrowth? Company's WACC?
?Note: Assume that the firm will always be able to utilize itsfull interest tax shield.

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3.8 Ratings (640 Votes)

a Cost of equity As per DDM Price Dividend in 1 yearcost of equity growth rate 2015 115 Cost of equity 0039 Cost of equity 961 b cost of preferred equity cost of preferred equity Preferred dividendprice100 See Answer

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Growth? Company's current share price is $ 20.15and it isexpected to pay a $ 1.15 dividend per share next year. After? that,the?firm's dividends are expected to grow at a rate of 3.9 % peryear.a. What is an estimate of Growth?Company's cost of? equity?b. Growth Company also has preferred stock outstanding that paysa $ 2.25 per share fixed dividend. If this stock is currentlypriced at $ 27.95 what is Growth?Company's cost of preferred?stock?c. Growth Company has existing debt issued three years ago witha coupon rate of 5.9 % The firm just issued new debt at par with acoupon rate of 6.1 % What is Growth? Company's cost of? debt?d. Growth Company has 4.8million common shares outstanding and1.3million preferred shares? outstanding, and its equity has atotal book value of $ 50.0million. Its liabilities have a marketvalue of $20.2million. If Growth? Company's common and preferredshares are priced as in parts?(a?)and ?(b?),what is the marketvalue of Growth?Company's assets?e. Growth Company faces a35 % tax rate. Given the information inparts (a?)through?(d?),and your answers to those? problems, what isGrowth? Company's WACC??Note: Assume that the firm will always be able to utilize itsfull interest tax shield.