Let's imagine a publicly traded company that only operates in the U.S. with a market cap...

 

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Let's imagine a publicly traded company that only operates in the U.S. with a market cap (market value of preferred stocks) of $15,000,000. the company common stocks has a market value of $35,000,000 This company's debt has a market value of $6,000,000. perfered Using the capital asset pricing model, we found that the company's cost of oatuity is 16.5%, and based on the yield to maturity of the company's debt, its cost of debt is 8%. Since the company only operates in the U.S., the corporate tax rate is a flat 21%. The expected earnings per share next year are $1.8. The current market value of the stock is $17. The historical growth rate for dividend payments is 2.5%. Calculate the company cost of capital Let's imagine a publicly traded company that only operates in the U.S. with a market cap (market value of preferred stocks) of $15,000,000. the company common stocks has a market value of $35,000,000 This company's debt has a market value of $6,000,000. perfered Using the capital asset pricing model, we found that the company's cost of oatuity is 16.5%, and based on the yield to maturity of the company's debt, its cost of debt is 8%. Since the company only operates in the U.S., the corporate tax rate is a flat 21%. The expected earnings per share next year are $1.8. The current market value of the stock is $17. The historical growth rate for dividend payments is 2.5%. Calculate the company cost of capital

Answer rating: 100% (QA)

To calculate the companys cost of capital we need to find the weighted average cost of capital WACC ... View the full answer