Calculate the cost of debt-equity and the wacc

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Reference no: EM131580107

Cost of Capital

The firm decides to raise $30 million by selling equity and debt. The investment bankers hired by your firm contact potential investors and come back with the following numbers:

Debt that pays $1 million coupons a year and $18 million maturity value after 10 years will sell for $20 million.

Equity that pays expected dividends of $1.2 million starting next year and growing at a rate of 3 percent per year thereafter sells for $10 million.

1: Calculate the cost of debt, equity, and the WACC.

Before starting your calculations, review the following materials:

-cost of capital and choice of financing

-equity, debt, and preferred stock

Submit your Cost of Debt Report

"SHOW YOUR CALCULATIONS/EQUATIONS"

Reference no: EM131580107

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