I NTEGRATED QUESTIONS The percentage of capital structure for ZEF Incorporated is provided here: Capital structure Weighted Bond 21% Preferred stock 5% Common stock 74% The firm is in a 25% tax bracket and plans to maintain its capital structure in the future. The firms cost of debt before tax is 13%. The cost of preferred stock is 17%. The common stock market price is RM22.50. The company’s executive anticipates a dividend constant growth rate of 7% and dividend for this year is expected to be RM2.30. To issue the new common stock, company will incur a floatation cost of RM2.50. a) Compute the firm’s weighted average cost of capital (WACC).
I NTEGRATED QUESTIONS The percentage of capital structure for ZEF Incorporated is provided here: Capital structure Weighted Bond 21% Preferred stock 5% Common stock 74% The firm is in a 25% tax bracket and plans to maintain its capital structure in the future. The firms cost of debt before tax is 13%. The cost of preferred stock is 17%. The common stock market price is RM22.50. The company’s executive anticipates a dividend constant growth rate of 7% and dividend for this year is expected to be RM2.30. To issue the new common stock, company will incur a floatation cost of RM2.50. a) Compute the firm’s weighted average cost of capital (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
Section: Chapter Questions
Problem 1PS
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I NTEGRATED QUESTIONS
The percentage of capital structure for ZEF Incorporated is provided here:
|
Capital structure |
Weighted |
|
Bond |
21% |
|
|
5% |
|
Common stock |
74% |
The firm is in a 25% tax bracket and plans to maintain its capital structure in the future. The firms cost of debt before tax is 13%. The cost of preferred stock is 17%.
The common stock market price is RM22.50. The company’s executive anticipates a dividend constant growth rate of 7% and dividend for this year is expected to be RM2.30. To issue the new common stock, company will incur a floatation cost of RM2.50.
a) Compute the firm’s weighted average cost of capital (WACC).
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