Question: Filer Manufacturing has 11 million shares of common stock outstanding. The current share price is $68, and the book value per share is $6. Filer Manufacturing also has one bond issue outstanding with a face value of $55 million, an 8 percent coupon (semiannual payments), and selling for 104 percent of par. The issue matures in 6 years. Dividends paid by the company for the last number of years are given in the table below; the most recent dividend received by the common shareholders was the $3.85 at time 0. The company's tax rate is 35 percent. What is Filer's Cost of Equity? (Note: Round growth rate to the nearest whole number)
|
Year
|
Dividend
|
|
0
|
3.85
|
|
-1
|
3.75
|
|
-2
|
3.50
|
|
-3
|
3.24
|
|
-4
|
3.05
|