Reference no: EM132523722
The Financial controller of "BESTH Co." is about to select among three available projects. He was provided the following information:
Project Rate of return
X 12.10 %
Y 11.80%
Z 12.95%
BESTH Co. has a capital structure that consists of $15,000 debt, $10,000 preferred stock, $40,000 internal common equity from retained earnings, and $35,000 external common equity through issuing new shares that would incur a 10% flotation cost.
The company estimates that it can issue debt at a before tax cost of 9%, and its tax rate is 40%. The company can also issue preferred stock at $60 per share, which pays a constant dividend of $6 per year.
The company's common stock currently sells at $30 per share. The year-end dividend, D1, is expected to be $2.50, and the dividend is expected to grow at a constant rate of 6% per year.
1. BESTH Co. weight of debt?
2. BESTH Co. weight of internal common equity from retained earnings?
3. BESTH Co. weight of external common equity ?
4. BESTH Co. weight of preferred equity?
5. The after-tax cost of debt for BESTH Co. ?
6. The cost of internal equity for BESTH Co. is
7. The cost of external equity for BESTH Co.?
8. The cost of preferred equity for BESTH Co.?
9. BESTH Co. weighted average cost of capital (WACC)?
10. The project(s) that can be accepted by the company is(are)?
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