and growth rate is percent.

What will Allis marginal cost of

Mas D. - P220, and its expected dividend growth rate is 6 percent retained earnings,
be?
15.89 13.99
7.946 d. 14.3%
ding Christop Co. 14. Analyst has collected the following information
• The company's capital structure is 20 percent equity and JO perechi debe • The yield
to maturity on the company's bonds is percent • The company's year-end dividend is
forecasted to be PO 80 a share - The company expect that is dividend will now at a
constant role of perucntact • The company's stock price is 25. • The company's tax rate
is 10 percent. • The company anticipates that it will need to raise new common stock
this year, and to
flotation costs will equal 10 percent of the amount issued
Assume the company accounts for flotation costs by adjusting the cost of capital. Given
this information, calculate the company's WACC
10.4196
12 56% c. 10.7890
135596
15. Flahe Electric has a capital structure that consists of 70 percent equity and 30
percent debt. The company's long-term bonds have a before-tax yield to maturity of 8.4
percent. The company uses the DCF approach to determine the cost of equity
Flaherty's common stock currently trades at 45 per share. The year-end dividend (DD)
is expected to be P2.50 per share, and the dividend is expected to grow forever at a
constant rate of 7 percent a year. The company estimates that it will have to issue new
common stock to help find this year's projects. The flotation cost on new common stock
issued is 10 percent, and the company's tax rate is 40 percent. What is the company's
weighted average cost of capital, WACC)
a. 10.73% b.103046
11.3195 d 7.48%
16. Billick Brothers is estimating its WACC. The company has collected the following
information:
Its capital structure consists of 40 percent debt and 60 percent common equity. • The
company has 20-year bonds outstanding with a 9 percent annual coupon that are
trading af par. The company's tax rate is 40 percent. The risk-free rute is 5.5 percent.
The market risk premium is 5 percent. The stock's beta is 1.4.
What is the company's WACC?
a. 9.71% b. 9.66% c. 8.31% d. 11.18%
17. The common stock of Ant Steel has a beta of 1.20. The risk-free rate is 5 percent
and the market risk premium (km - kre) is 6 percent. Assume the firm will be able to use
retained earnings to fund the equity portion of its capital budget. What is the company's
cost of retained earnings, ks?
a. 7.0% b. 7.2% c. 11.0% d. 12.2%
18. A company just paid a P2.00 per share dividend on its common stock (D. = P2.00).
The dividend is expected to grow at a constant rate of 7 percent per year. The stock
currently sells for P42 a share. If the company issues additional stock, it must pay its
investment banker a flotation cost of P1.00 per share. What is the cost of extemal
equity, ke?
a 11.76%