Norris Enterprises is considering some options to reduce its WACC. Currently, the company has $20 million of retained earnings, and $10 million of common stock outstanding, selling at $40 per share. Norris' expected dividend next year is $1.25, growing at 10% annually. What is Norris' current WACC? (notice that Norris only has equity funding, no debt.) Norris Enterprises WACC: Plan 1: sell $5 million of preferred stock. Goldman Bankers has told Norris it believes it can sell Norris shares for $60 per share (100,000 shares) if a dividend of $3.60 is offered. Say Norris chooses this plan, and the shares trade for $60 after the sale. Norris' cost of preferred stock: Norris Enterprises WACC:

Norris Enterprises is considering some options to reduce its WACC. Currently, the company has $20 million of retained earnings, and $10 million of common stock outstanding, selling at $40 per share. Norris' expected dividend next year is $1.25, growing at 10% annually. What is Norris' current WACC? (notice that Norris only has equity funding, no debt.) Norris Enterprises WACC: Plan 1: sell $5 million of preferred stock. Goldman Bankers has told Norris it believes it can sell Norris shares for $60 per share (100,000 shares) if a dividend of $3.60 is offered. Say Norris chooses this plan, and the shares trade for $60 after the sale. Norris' cost of preferred stock: Norris Enterprises WACC:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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