The company PPP SA is considering making a new investment with a lifetime 5 years which...

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The company "PPP SA" is considering making a new investment with a lifetime 5 years which requires an initial expenditure of €500,000. The new investment will be financed by 20% with new common shares, 30% with a bond loan and the rest with a bank loan borrowing. The tax rate is 35%. The interest rate of the bank loan, pre tax, is 6%. The current share price is €50, the last dividend paid equal to €2 and an expected dividend growth rate of 2% per year forever. Finally, the five-year bond to be issued will have a zero coupon and a face value equal to €1,000. It is expected that each bond will sell for €725. Calculate the Mean Standardized Cost of Capital (WACC)? The company "PPP SA" is considering making a new investment with a lifetime 5 years which requires an initial expenditure of €500,000. The new investment will be financed by 20% with new common shares, 30% with a bond loan and the rest with a bank loan borrowing. The tax rate is 35%. The interest rate of the bank loan, pre tax, is 6%. The current share price is €50, the last dividend paid equal to €2 and an expected dividend growth rate of 2% per year forever. Finally, the five-year bond to be issued will have a zero coupon and a face value equal to €1,000. It is expected that each bond will sell for €725. Calculate the Mean Standardized Cost of Capital (WACC)?

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Cost of equity The cost of equity is the return required by the shareholders We can calculate it usi... View the full answer