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Calculate the cost of debt-quity and the wacc

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Reference no: EM131558534

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 and Calculations to the dropbox below. Be sure to show your calculations in Excel and provide a narrative analysis in PowerPoint. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of company.

Reference no: EM131558534

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