Cadeen Construction Company Limited (CCCL) has the following capital structure, which is considered to be optimal. Debt 20% Preferred 15% Common Stock 65% Total 100% CCCL’s tax rate is 35% and investors expect earnings and dividends to grow at a constant rate of 6% in the future. CCCL paid a dividend of $3.70 per share last year, and its stock currently sells at a price of $60 per share. CCC’s beta is 1.8, the risk-free rate is 6% and the market risk premium is 5%. New preferred stock could be sold to the public at a price of $100 per share with a dividend of $9 and a flotation cost of $5 per share would be incurred. Debt could be sold at an interest rate of 9%. Calculate the WACC for Cadeen Construction Company Limited (CCCL) using Capital Asset Model (CAPM)
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Cadeen Construction Company Limited (CCCL) has the following capital structure, which is considered to be optimal.
Debt 20%
Preferred 15%
Common Stock 65%
Total 100%
CCCL’s tax rate is 35% and investors expect earnings and dividends to grow at a constant rate of 6% in the future. CCCL paid a dividend of $3.70 per share last year, and its stock currently sells at a price of $60 per share. CCC’s beta is 1.8, the risk-free rate is 6% and the market risk premium is 5%. New
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