panys current share price is 1985 and it is expected to pay

pany\'s current share price is $19.85 and it is expected to pay a $1.10 dividend per share next year. After that, the firm\'s dividends are expected to grow at a rate of 3.7% per year. What is an estimate of Growth Company\'s cost of equity? b. Growth Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.15, what is Growth Company\'s cost of preferred stock? C. Growth Company has existing debt issued three years ago with a coupon rate of 5.8%. The firm just issued new debt at par with a coupon rate of 6.7%. What is Growth Company\'s cost of debt? d. Growth Company has 4.6 million common shares outstanding and 1.2 million preferred shares outstanding, and its equity has a total book value of $50.1 million. Its liabilities have a market value of S20.2 milon. If Growth Company\'s common and preferred shares are priced as in parts (a) and (b), what is the market value of Growth Company\'s assets? e, Growth Company faces a 35% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Growth Company\'s WACC? Company\'s has g total book value of 580.1 ilitos

Solution

We are supposed to solve 4 parts when multiple posted

a) stock price= Dividedn in year 1/(cost of equity-growth)
cost of equity=(1.1/19.85)+3.7%
=9.24%
b)stock price=dividend/cost of preferred stock
cost of preferred stock=2.25/28.15=7.99%
c)cost of debt since issued at par so it is 6.7%
d)market value of debt=20.2mn
Market value of preferred stock=1.2*28.15=33.78mn
market value of equity=4.6*19.85=91.31mn
AMrket value of assets=20.2+33.78+91.31=145.29mn