You have been .asked to estimate the weighted average cost of capital (WACC) for Germina Corp., a mid-cap Pharmaceutical company in New York. You have been provided with the following information. 1. Common Shares - the current market price of Germina's 100,000 common shares on the NYSE stock exchange is $3 per share. Germina just paid a dividend of $0.75 per share last year and the company's financial analysts have indicated that the dividends should grow at an average annual rate of 2% for the foreseeable future.
You have been .asked to estimate the weighted average cost of capital (WACC) for Germina Corp., a mid-cap Pharmaceutical company in New York. You have been provided with the following information. 1. Common Shares - the current market price of Germina's 100,000 common shares on the NYSE stock exchange is $3 per share. Germina just paid a dividend of $0.75 per share last year and the company's financial analysts have indicated that the dividends should grow at an average annual rate of 2% for the foreseeable future.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
a) Calculate Germina's
b) Calculate Germina's after-tax cost of debt
c) Calculate Germina's cost of
d) Calculate Germina's Weighted Average Cost of Capital
Transcribed Image Text:You have been .asked to estimate the weighted average cost of capital (WACC) for Germina
Corp., a mid-cap Pharmaceutical company in New York. You have been provided with the
following information.
1. Common Shares
the NYSE stock exchange is $3 per share. Germina just paid a dividend of $0.75 per
share last year and the company's financial analysts have indicated that the dividends
should grow at an average annual rate of 2% for the foreseeable future.
- the current market price of Germina's 100,000 common shares on
2. Preferred Shares
dividend of $1.00 per share and have a current market price of $5 per share.
The Company also has 200,000 preferred shares that carry a stated
3. Germina has 1,500 $1,000 face value bonds outstanding that carry a 10% coupon rate.
The Yield to Maturity is 8%. The bonds will mature in 20 years. Bond interest is paid
semi-annually.
Germina Corp's tax rate is 40%.
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