he Alcatel has a tax rate of 30%. The company can raise debt at a 12% interest rate and the last dividend paid by Alcatel was PO.90. Alcatel's common stock is selling for P8.59 per share, and its expected growth rate in earnings and dividend is 5%. If Alcatel issue new common stock, the flotation cost incurred will be 10%. Alacatel plans to finance all capital expenditures with 30% debt and 70% equity. a. What is alcatel's weighed average cost of capital if the firm has sufficient retained earnings to fund the equity portion of its capital budget? b. What is alcatel's weighted average cost of capital if the firm raised the equity portion by selling new shares of stock? c. What is the cost of equity if its reta
The Alcatel has a tax rate of 30%. The company can raise debt at a
12% interest rate and the last dividend paid by Alcatel was PO.90. Alcatel's common
stock is selling for P8.59 per share, and its expected growth rate in earnings and
dividend is 5%. If Alcatel issue new common stock, the flotation cost incurred will be
10%. Alacatel plans to finance all capital expenditures with 30% debt and 70% equity.
a. What is alcatel's weighed average cost of capital if the firm has
sufficient
budget?
b. What is alcatel's weighted average cost of capital if the firm raised the
equity portion by selling new shares of stock?
c. What is the
equity requirements and the rest new issue of common shares will be sold?
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