What is an estimate of growth company cost of equity

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Growth? Company's current share price is $20.20 and it is expected to pay a $1.20 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 3.6% per year.

a. What is an estimate of Growth Company's cost of equity?

b. Growth Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.05?, what is Growth Company's cost of preferred stock?

c. Growth Company has existing debt issued three years ago with a coupon rate of 6.2%. The firm just issued new debt at par with a coupon rate of 6.6%. What is Growth Company's cost of debt?

d. Growth Company has 4.5 million common shares outstanding and 1.4 million preferred shares outstanding, and its equity has a total book value of $50.0 million. Its liabilities have a market value of $20.5 million. If Growth Company's common and preferred shares are priced as in parts (a) and (b) what is the market value of Growth Company's assets?

e. Growth Company faces a 35% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Growth Company's WACC?

Reference no: EM131982606

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