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Suppose Stoney Creek Corporation just issued a dividend of 52.08 per share on its common stock for 2020 The company paid dividendsover the last four years. It paid $1.71 per share in 2016, 51.82 per share in 2017. $1.93 per share in 2018 and $1.99 per share in 2019. If the stock currently sells for $45 you are required to use the dividend growth model to calculate to cost of equity capital. What is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends? What if you use the geometric average growth rate? . The management of the Stoney Creek Corporation provided you with additional information for you to calculate the cost of equity through the CAPM method. They indicated that the stock has a beta of 1.27. The market risk premium is 55 percent and T-bills are currently yielding 3.7 percent. If the stock sells for 545 per share, calculate the cost of equity using the CAPM approach. . The Stoney Creek Corporation has a target capital structure of 70 percent common stock 5 percent preferred stock, and 25 percent debt its cost of equity is what you calculated in question tb above through the CAPM method. The cost of preferred stock is 5 percent, and the cost of debt is 7 percent. The relevant tax rate is 35 percent a. What is the Stoney Creek Corporation's WACC? b The company president has approached you about Stoney Creak Corporations capital structure He wants to know why the company doesn't use more preferred stock financing because it costs less than debt. Calculate the true cost debt to the company and tell the president whether debt or preferred stocks financing is cheaper? Input Area Dividend per share Stock price Total number of years Stock Beta Market Risk Premium Treasury Bills Rate 52.081 $ 45.00 54.00 1.27 5.50% 3.70% 5 Dividends. 2016 2017 2018 2019 2020 $ 1.71 5 1.82 $ 1.93 $ 1.99 52.08 Weight of Common Stock Weight of Preferred Stock Weight of Debt Cost of Preferred Share Cost of Debt Tax Rate 70% 5% 25% 5% 7% 35% Output Area Calculating Growth Rates 91 92 93 94 garithmetic g(geometric) Dividend Growth Model (DGM) Cost of Equity {RE (Arithmetic)} Cost of Equity {RE (geometric)} ii Capital Asset Pricing Model (CAPM) Cost of Equity Capital (RE) Weighted Average Cost of Capital (WACC) a (WACC) b After Tax cost of debt TRAITSVET the company TTESTET question about cheaper source of finance

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