Business, 19.08.2020 20:01 nickthequick
Rollins Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock, and 60% common equity. Its bonds have a 7.5% coupon, paid semi-annually, a current maturity of 20 years, and sell for $1,105.78. The firm could sell, at par, $100 preferred stock which pays a 8% annual dividend, but flotation costs of 5 percent would be incurred. Rollins' beta is 1.8, the risk-free rate is 2.45%, and the market risk premium is 5%. The firm's marginal tax rate is 40 percent.
A. What is the companyâs cost of preferred equity?
B. What is the companyâs cost of common equity?
C. What is the companyâs WACC?
Answers: 2
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Rollins Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred...
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