Calculate the cost of common stock equity

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A Company has $8,000,000 in outstanding debt in bonds. The Company's bonds are all 10-year bonds with coupon rate of 9% and yield of 13%. The Company has 1,100,000 shares outstanding. the book value per share is $10 while the market price is $18 per share. the company has a Beta of 1.25 and faces a tax rate of 19%. The market quotations show that the Company share price rose 26% last year and analysts expect 16% growth in the next years. The main stock index on this capital market performs 20% yearly and T-Bond rate is 8%. Calculate the cost of common stock equity using the CAPM model and the weighted average cost of capital WACC for the Company.

Reference no: EM133056276

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