Question: D Question 2 4 pts Given the following information: ABC firm just paid dividend $2 per share The current stock price is $20 per share
D Question 2 4 pts Given the following information: ABC firm just paid dividend $2 per share The current stock price is $20 per share and there are 5 million shares of outstanding stocks Firm beta is equivalent to market average beta Constant growth rate is 5% Expected market return is 12% and risk free rate is 2% Total value of equity is $ 100 million and total value of debt is $200 million Cost of borrowing/issuing bond is 5% Corporate tax rate 30% a) What is the cost of equity using dividend growth mydel? b) What is the cost of equity using CAPM model c) What is the weights for common stock and debt? d) What is the WACC for your firm using cost of equity from CAPM
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