Compute the cost of equity re

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Question 1: 50% of Lazurro corp. capital is financed by debt whereas preferred stocks capture only 16 of the capital. The preferred stock of the corporation currently sells for $190 per share with a preferred dividend to be paid forever of $9.50. Knowing that the WACC is estimated to 7.5%, the interest rate on newly issued debt, with the same risk as Lazurro bonds is 5 percent and the company's tax rate is 35 percent, compute the cost of equity RE.

Group of answer choices

Option 1: 25.25 %

Option 2: 12.50 %

Option 3: 15.125 %

Option 4: 18.145 %

Reference no: EM132503443

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