A. Suppose a company has 40,000 shares of stock selling for 29 per share. They are expected to pay dividends of 3.15 per share. The have the following past data for their historical dividends
year dividend
2012 1.68
2013 1.85
2014 1.90
2015 2.15
2016 2.18
We also know that the stocks beta is 1.2 and expected return on the market is 7.5 %. Using the average of dgm and capm what is the cost of equity. The risk free rate is 4 %
b. In addition to the stock the company also has 400 bonds currently selling at 1,052.50 each. The cost of debt, or required return on these bonds is 6.8 % the tax rate is 35% what is the WACC.