Cost of Capital Epsilon Company's last annual dividend was $4 per share, and both earnings and...
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Cost of Capital Epsilon Company's last annual dividend was $4 per share, and both earnings and dividends are expected to grow at a constant rate of 7%. The stock now sells for $50 per share. The company's beta coefficient is 1.5. The return of a market portfolio is 12%, and the risk-free rate is 8%. The company's A-rated bonds are yielding 9%. Epsilon Company's has Debt to Equity ratio 140%. d. Calculate cost of debt if corporate tax is 25%? e. Calculate the cost of equity using (a) the capital asset pricing model and the dividend discount model? f. What is the weighted average cost of capital? Cost of Capital Epsilon Company's last annual dividend was $4 per share, and both earnings and dividends are expected to grow at a constant rate of 7%. The stock now sells for $50 per share. The company's beta coefficient is 1.5. The return of a market portfolio is 12%, and the risk-free rate is 8%. The company's A-rated bonds are yielding 9%. Epsilon Company's has Debt to Equity ratio 140%. d. Calculate cost of debt if corporate tax is 25%? e. Calculate the cost of equity using (a) the capital asset pricing model and the dividend discount model? f. What is the weighted average cost of capital?
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