Always Learning Company's current share price is $19.90 and it is expected to pay a $1.00 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.1% per year. a. What is an estimate of Always Learning Company's cost of equity based on dividend growth model? Always Learning Company has a stock beta of 0.91, if the current 10-year U.S. treasury yield is 4.5%, market risk premium is 7%, what is an estimate of Always Learning Company's cost of equity based on CAPM? b. Always Learning Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.10, what is Always Learning Company's cost of preferred stock? c. Always Learning Company has existing debt issued three years ago with a coupon rate of 5.80%. The firm just issued new debt at par with a coupon rate of 6.50%. What is Always Learning Company's pretax cost of debt? d. Always Learning Company has 4.7 million common shares outstanding and 1.1 million preferred shares outstanding, and its equity has a total book value of $49.9 million. Its liabilities have a market value of $20.43 million. If Always Learning Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Always Learning Company's assets? e. Always Learning Company faces a 21% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Always Learning Company's WACC using the cost of equity based on the CAPM? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. What is an estimate of Always Learning Company's cost of equity based on dividend growth model? The cost of equity capital for Always Learning Company based on dividend growth model is 9.13%. (Round to two decimal places.) What is an estimate of Always Learning Company's cost of equity based on CAPM? The cost of equity capital for Always Learning Company based on CAPM is %. (Round to two decimal places.) b. Always Learning Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.10, what is Always Learning Company's cost of preferred stock? The cost of preferred stock for Always Learning Company is %. (Round to two decimal places.)

Always Learning Company's current share price is $19.90 and it is expected to pay a $1.00 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.1% per year. a. What is an estimate of Always Learning Company's cost of equity based on dividend growth model? Always Learning Company has a stock beta of 0.91, if the current 10-year U.S. treasury yield is 4.5%, market risk premium is 7%, what is an estimate of Always Learning Company's cost of equity based on CAPM? b. Always Learning Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.10, what is Always Learning Company's cost of preferred stock? c. Always Learning Company has existing debt issued three years ago with a coupon rate of 5.80%. The firm just issued new debt at par with a coupon rate of 6.50%. What is Always Learning Company's pretax cost of debt? d. Always Learning Company has 4.7 million common shares outstanding and 1.1 million preferred shares outstanding, and its equity has a total book value of $49.9 million. Its liabilities have a market value of $20.43 million. If Always Learning Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Always Learning Company's assets? e. Always Learning Company faces a 21% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Always Learning Company's WACC using the cost of equity based on the CAPM? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. What is an estimate of Always Learning Company's cost of equity based on dividend growth model? The cost of equity capital for Always Learning Company based on dividend growth model is 9.13%. (Round to two decimal places.) What is an estimate of Always Learning Company's cost of equity based on CAPM? The cost of equity capital for Always Learning Company based on CAPM is %. (Round to two decimal places.) b. Always Learning Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.10, what is Always Learning Company's cost of preferred stock? The cost of preferred stock for Always Learning Company is %. (Round to two decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 13P

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