Calculate mint green berhad weighted average cost

Reference no: EM132175134

Question -

a) Mint Green Berhad, a public listed company has 24 million stocks outstanding. Next year's dividend is expected to be RM2.80 per share. Dividends have been growing at 5% per year over the last several years and are expected to continue at the same growth rate over the foreseeable future. The stock is currently traded at RM 20.00 per share. Mint Green's bonds which have 8% yield to maturity and a 7.2% coupon rate are selling at their par value of RM1,000 each. Finally, Mint Green's preferred stocks of which there are one million have a fixed dividend of RM 2.00 each and are currently selling at RM14.30 per share. The company's tax rate is 28%.

Required:

i. Calculate Mint Green Berhad appropriate weighted average cost of capital (WACC).

ii. What is meant by optimal capital structure? Why does it vary by industry?

b) Dividends are relevant, but dividend policy is irrelevant. Do you agree with this statement? Support your view.

Reference no: EM132175134

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