1 answer

6. A stock has just paid 56 of dividend. The dividend is expected to grow at...

Question:

6. A stock has just paid 56 of dividend. The dividend is expected to grow at a constant rate of 9% year, and the common stock
1. A company just paid a dividend of D, = 52.00 for its stock. Companys dividend is expected to grow by 40% in the first yea
6. A stock has just paid 56 of dividend. The dividend is expected to grow at a constant rate of 9% year, and the common stock currently sells for $89. The before tax cost of debt is 6%, and the tax rate is 45%. The target capital structure consists of 35% debt and 62% common equity. What is the company's WACC if all the equity used is from retained earnings? 11.39% 12.07% 12 10485 10.02
1. A company just paid a dividend of D, = 52.00 for its stock. Company's dividend is expected to grow by 40% in the first year, by 35% in Year 2, by 12% in Year 3 and and at a constant rate of in Year 4 and thereafter. The required return on this stock is 8%. What is the stock's current value? $74.51 $8549 $78.43 573.72 $82.35

Answers

6.

Given,

Current dividend (D0) = $6

Growth rate (g) = 9% or 0.09

Current stock price (P0) = $89

Before-tax cost of debt = 6%

Tax rate (t) = 45% or 0.45

Weight of debt = 38% or 0.38

Weight of equity = 62% or 0.62

Solution :-

= (3.30%)(0.38) + (16.348 %)(0.67) = 1.254 % + 10.13576% - 11.38976 or 11. 39 % Thus, the companys WACC is 11.39%

.

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