(Cost of Capital) The company has 100 000 shares outstanding. The shares are listed in a stock exchange and currently trade at 15 Dollar per share. The risk free interest rate is currently 3% and the market risk premium is estimated to be 5%. The company has higher than average systematic risk, which is reflected in the value of beta, which is 1.6 The company has also issued 5000 preferred stocks, which pay 6.0% fixed dividends from the par value of 100 dollars. The preferred stocks are currently traded at 90% of the par value. Moreover, the company is going to issue 1500 discount bonds, which mature exactly 5 years. The face value of these bonds is 1000 EUR but the current market price is 783.53 dollar
Find: (SHOW ALL STAGES OF CALCULATIONS)
a) Market value of equity and cost of equity
b) Market value of preferred stock and the cost of preferred stock
c) Market value of the debt and the cost of debt. If you were unable to find cost of debt use 4%
d) Estimate the cost of capital
e) Should the company invest into the new investment project which has IRR=9%