Calculate the cost of common equity

Reference no: EM131792880

Question: Maschale Corp. wants to issue bonds with a zero coupon bond, a face value of $1,000, and 12 years to maturity. Maschale estimates that the bonds will sell for $ 384. Maschale Corp. common stock currently sells for $30 per share. Maschale paid a dividend yesterday of $ 4.00 per share and expects the dividend to grow at a constant rate of 5% per year. Maschale's capital structure is$4 million debt, $6 million common equity and $5 million preferred stock which pays $3.2 dividend and selling at $40 per share. Maschale's marginal tax rate is 35%

a. Calculate the after-tax cost of debt assuming Maschale's bonds are its only debt.

b. Calculate the cost of preferred stock.

c. Calculate the cost of common equity.

d. Calculate the weighted average cost of capital

Reference no: EM131792880

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