The dempere imports companys eps in 2011 was 300 and in

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The Dempere Imports Company's EPS in 2011 was $ 3.00, and in 2006 it was $ 1.80. The company's payout ratio is 30 percent, and the stock is currently valued at $41.50. Flotation costs for new equity will be 7 percent. Net income in 2012 is expected to be $15 million. The market-value weights of the firm's debt and equity are 40 percent and 60 percent, respectively.

a) Based on the 5-year track record, what is Dempere's EPS growth rate? Evaluate the dividend be in 2012?

b) Determine the firm's cost of retained earnings and the cost of new common equity.

c) Determine the break-point associated with retained earnings.

d) If Dempere's after-tax cost of debt is 6 percent, what is the WACC with retained earnings? 

Reference no: EM13370970

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