Question: Problem #5: Data for Thaler Inc. is given below: A B 1 Tax rate 0.21 2 Equity 170,000 3 Debt 85,000 4 Div. payout ratio

Problem #5:

Data for Thaler Inc. is given below:

A B
1 Tax rate 0.21
2 Equity 170,000
3 Debt 85,000
4 Div. payout ratio 0.7
5 P0 76.03
6 g 0.05
7 EPS 3.88
8 Cost of debt 0.03

Part 1) What is the cost of equity? (Hint: EPS and div. payout ratio can determine the next period's dividend)

Part 2) What is the weighted average cost of capital?

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