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The Firms EPS in 2017 was $3 and in 2012 it was $1. The firm's payout ratio is 50% and the stock is currently valued at $65. Flotation costs for new equity will be 7%. Net income in 2018 is expected to be $20.5 million. The firm's investment banker estimates that it could sell 20-year semiannual bonds with a coupon rate of 6%. The face value would be $1000 and the flotation costs for a bond issue would be 3%. The market Value weights of the firms debt and equity are 40% and 60% respectively. The firm faces a 35% tax rate.
Using Excell:
1. Based on the 5 year track record, what is the firms EPS growth Rate?
2. What would be the dividend in 2018?
3. Calculate the firms cost of retained earnings
4. calculate the firms cost of new common equity
5.calculate the break point associated with retained earnings.
6. What is the firms after tax cost of new debt?
7. What is the firms after tax WACC with retained earnings?
8. What is the Firms after tax WACC with new equity?
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