4. Firm A has only debt and equity in its capital. Its debt consists of a...

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4. Firm A has only debt and equity in its capital. Its debt consists of a 10-million- dollar bond with coupon rate 6% paid semi-annually. The bond has a market price of $1100 and 10-year maturity. Its stock has a beta of 1.5 and risk free rate is currently 4%. The firm expects to pay a constant dividend of $3 per share for the next 2 years and then expect the dividend to grow 3% per year. The firm has 1 million shares outstanding with the stock price traded at $40/share. Find the WACC for this company if tax rate is 30%. 4. Firm A has only debt and equity in its capital. Its debt consists of a 10-million- dollar bond with coupon rate 6% paid semi-annually. The bond has a market price of $1100 and 10-year maturity. Its stock has a beta of 1.5 and risk free rate is currently 4%. The firm expects to pay a constant dividend of $3 per share for the next 2 years and then expect the dividend to grow 3% per year. The firm has 1 million shares outstanding with the stock price traded at $40/share. Find the WACC for this company if tax rate is 30%.

Answer rating: 100% (QA)

SOLUTION The WACC weighted average cost of capital for this company can be calculated as a weighted ... View the full answer