Falcons Footwear has 12 million shares of common stock selling for $45/share. They are expected to pay a $2.25 dividend next year, and the dividend is forecast to grow at 4%. They have 2 million shares of 6% preferred stock selling for $125/share and $100 million of 4% coupon bonds trading at par. They are in the 21% tax bracket. 1. What is the cost of common stock? 2. What is the WACC?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Falcons Footwear has 12 million shares of common stock
selling for $45/share. They are expected to pay a $2.25
dividend next year, and the dividend is forecast to grow at
4%. They have 2 million shares of 6% preferred stock selling
for $125/share and $100 million of 4% coupon bonds trading
at par. They are in the 21% tax bracket. 1. What is the cost of
common stock? 2. What is the WACC?
Transcribed Image Text:Falcons Footwear has 12 million shares of common stock selling for $45/share. They are expected to pay a $2.25 dividend next year, and the dividend is forecast to grow at 4%. They have 2 million shares of 6% preferred stock selling for $125/share and $100 million of 4% coupon bonds trading at par. They are in the 21% tax bracket. 1. What is the cost of common stock? 2. What is the WACC?
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