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Compute the cost of preferred equity of spidey tools

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Q1. Y Corporation needs to raise capital to purchase new equipment for its research laboratory. Use the following information to compute the WACC for Y Corporation.

Equity financing = P200,000

Cost of equity = 10%

Debt financing = P400,000

Cost of debt = 5%

Tax rate = 30%

Q2. Spidey tools issued new preferred shares which sold for P85 in the stock market. Holders of the stock will receive an annual dividend of 9.35. Assuming flotation cost of 6% and tax rate of 30%, compute the cost of preferred equity of Spidey Tools?

Q3. IJ Company established a target capital structure of 40% debt, 60% common equity. The market price of the firm's stock is P30 and last dividend was 2.20 per share. It is expected that growth rate is 8%. What will be IJ's marginal cost of retained earnings?

Reference no: EM132798162

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