What is metal fiber industries wacc

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Reference no: EM132544317

Metal Fiber Industries, a fiber optic company is considering to optimize its capital structure. Its targeted capital structure consists of 20% debt, 30% preferred stocks, and 50% common stocks.

Metal Fiber Industries has been paying dividend 30% of its net income regularly. Current stock price is Rs. 54, and a constant growth rate is 9%. Metal fiber Industries expecting next year earning to be Rs. 44, 000,000. Last year dividend paid Rs. 3.60 by the company. Corporate tax rate is 40%.

Metal Fiber Industries considering to raise further debt at the interest rate of 12%. They are also considering to issue new preferred stock at 11% fixed dividend rate, which could be sold in the market at Rs. 110.

Required:

Question a. What is the cost of each of the capital components of Metal Fiber Industries?

Question b. What is Metal Fiber Industries' WACC?

Reference no: EM132544317

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