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What is the cost of new common equity

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Reference no: EM133017038

Question - Now (use the following information) suppose that:

The cost of debt (rd) is 3.75% (before tax),

Flotation costs (F) = 7% of issue price,

The debt is trading at $1,022.00,

There are 7,250 bonds outstanding,

The tax rate is .32,

The LAST dividend paid yesterday (D0 ) = $4.66,

The expected constant growth rate (g) = 2.75%,

Beta = 1.65,

rRF = 1.04%,

RPm = 4.5%, (market risk premium)

The firm has 200,000 shares of common stock outstanding,

Common stock shares are trading at $47.34/share (P0).

Required - What is the cost of existing common equity (retained earnings)?

What is the cost of NEW common equity?

What is the firm's WACC using existing common equity?

Reference no: EM133017038

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