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Assume that you have the following information:- Market Info:- Real interest rate = 2.0%; Expected inflation...

Assume that you have the following information:-

Market Info:- Real interest rate = 2.0%; Expected inflation = 4.0%; Rm = 12.0%; Tax = 30.0%.

Com. Stock info:- Par value = $1.0 ; Market value (price) = ?? ; Beta = 1.60 ; No. of outstanding shares = 1,000,000.0 ; EPS $3.0 ; pay-out ratio = 30.0%;

Growth in EPS & Dividends = 5.0% ;

Preferred Stock info:- Par value = $100.0; Dividend per share = 10.0%; Rp=8.0%; No. of outstanding shares = 100,000.0; Price = ????

Bonds info:- Par value = $1,000.0; Coupon interest = 4.0% ; YTM = 6.0%; Time to maturity = 20 years ; No. of bonds = 100.0; Price = ???

1- Calculate the WACC using historical weights in the capital structure.

2 - Calculate the WACC using market weights in the capital structure.

3 - The before and after tax cost of debt.

4 -The before and after tax cost of equity.

5 - The before and after tax cost of preferred stock.

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Expert Solution

jeff jeffy answered 1 year ago
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