Question Discoverit! Company has just paid $1 dividend payment and they promise to increase dividend payments by 1.5%. The current stock price is $18 and has 400,000 outstanding shares. Calculate cost of equity, based on DGM.
The company has a beta of 1.2 and market risk premium is 8%. Risk free rate is 2%. Calculate cost of equity, based on SML.
Discoverit! has only one bond outstanding with a maturity period of 15 years. The bond makes semiannual coupon payments and the coupon rates is 11%. The selling price of the bond is $1,067 and face is $1,000. The tax rate is 21% and the company has 3,000 bonds outstanding. Calculate before and after-tax cost of debt.
Calculate WACC using SML approach to calculate Cost of Equity.
Calculate WACC using Dividend Growth Model approach to calculate Cost of Equity.
D WEIGHTS COST OF EQUITY 2. SML Approach 1 15 2 12 Stock Price Bond Price 18 Stockoutandine 1067 Bonds outstanding 2 1. Dividend Growth Mode OGM)Approach 3DO/17 G PO Required Return on ollut 600.000 EUR 3.000 DEBT VALUE OF FM ER! Ecotoulty We of uity We of Debt COST OF DEBT You can calle PMI column WACE. Based on SM Approach of forest of Remember the formule WACC-Cofuity Weight of Equity Martas Cortoft 1,047 1.000 Saucoupon Payment and 10 N 11 con 12 11 Face IR Periode 15 Y Dret Cost of 10 Tax 17 And Coco 1 WACC-Baden Dividend Growth Model for Cost of Equity Remember the formula WACC Cort of fourty Weight of Equity Allee Cow of Debt Weight of Debt where you use Required turn for Cost of Equity