Question
In: Finance
Year Dividend 2007 $ 0.02 2008 $ &nbs
| Year | Dividend | ||
| 2007 | $ 0.02 | ||
| 2008 | $ 0.03 | ||
| 2009 | $ 0.04 | ||
| 2010 | $ 0.05 | ||
| 2011 | $ 0.06 | ||
| current stock price | $10.00 | ||
| Number of stock shares | 400,000 | ||
| Debt/Equity ratio | 0.75 | ||
| Interest Paid | 240,000 | ||
| tax rate | 36% | ||
| Part A. Estimate the constant annual compounding growth rate based on the dividends 2007 through 2011. | |||
| Growth rate | |||
| Part B. Use the Gordon dividend model to estimate the cost of equity | |||
| Cost of equity | |||
| B. Calculate the WACC | |||
| Cost of debt | |||
| WACC | |||
Solutions
Expert Solution
THE WAY THE YELLOW CELLS ARE GIVEN , I HAVE ASSUMED THAT
IT IS FULLY EXCEL PRESENTATION. SO I HAVE SOLVED FULLY USING EXCEL.
I HAVE GIVEN CELL REFERENCES AS WELL SO THAT IT IS EASY TO
UNDERSTAND. THANK YOU
jeff jeffy answered 1 year agoRelated Solutions
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Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
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$ 7.46
$ 7.91
$ 8.38
$ 8.80
$ 9.24
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$ 10.28
$ 10.79
$ 11.33
$ 12.01
Find both the arithmetic growth rate and the geometric growth
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End of Year
Stock Price $
Returns %
2007
$ 20.91
-------
2008
14.06
-32.76%
2009
24.81
76.46
2010
35.57
43.37
2011
32.58
-8.41
2012
48.02
47.37
2013
67.43
40.42
2014
51.26
-23.98
2015
36.91
-27.99
2016
47.71
29.26
2017
44.55
-6.62
I received that correct answers, however I do not know how to
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you.
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2005
2006
2007
2008
2009
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5%
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Year
2006
2007
2008
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300
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2009
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