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Determine the cost of each capital component

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Reference no: EM132578336

Liverpool FC has the following capital structure, which it considers to be optimal:

debt - 25%

preffered stock- 15

common equity -60

100%

Liverpool's federal-plus-state tax rate is 40%; and investors expect future earnings and dividends to grow at a constant rate of 9%. Liverpool paid a dividend of $3.60 per share last year, and its stock currently sells for $64.00 per share. LEI can obtain new capital in the following ways:

  • New preferred stock with a dividend of $11 can be sold to the public at a price of $95 per share.
  • Debt can be sold at an interest rate of 12%.

Question a. Determine the cost of each capital component.

Question b. Calculate the WACC

Reference no: EM132578336

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