Cost of Capital
The firm decides to raise $30 million by selling equity and debt. The investment bankers hired by your firm contact potential investors and come back with the following numbers:
Debt that pays $1 million coupons a year and $18 million maturity value after 10 years will sell for $20 million.
Equity that pays expected dividends of $1.2 million starting next year and growing at a rate of 3 percent per year thereafter sells for $10 million.
1: Calculate the cost of debt, equity, and the WACC.
Before starting your calculations, review the following materials:
-cost of capital and choice of financing
-equity, debt, and preferred stock
Submit your Cost of Debt Report
"SHOW YOUR CALCULATIONS/EQUATIONS"