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

ABC has estimated the after-tax costs of debt and equity capital 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 dividends to grow at a constant rate of 7%, what is ABC’s stock price if it obtains its optimal capital structure?

Expert Solution

jeff jeffy answered 1 year ago

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