Unit 5

Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If D₀ = $5 and r_s = 18%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent.

Maxwell Mining Company has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Maxwell Minings CFO estimates that the company's WACC is 12.40%. What is Maxwell Minings cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.