Question: NDM Limited is expected to pay $4.95 dividends per common stock at end of the year. This dividend is expected to grow at a constant

NDM Limited is expected to pay $4.95 dividends per common stock at end of the year. This dividend is expected to grow at a constant rate of 6% per annum. The stock is currently trading at $82.50. The company has a pre-tax cost of debt of 9.30% and its preferred stock is trading at $220 with a dividend of $19.25. The tax rate is 40%r

1. Determine the company’s WACC if its capital structure is as follows:

Common Stock $100 000 000

Preferred Stock $ 40 000 000

Bonds $110 000 000

Total $250 000 000

2. The company has a high amount of debt. Briefly discuss the importance of Gearing ratios as a financial risk indicator and identify one that can be used in this case.

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