What is the firm weighted average cost of capital

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Question - Company A currently has €300 million of market value debt outstanding. The 9 per cent coupon bonds (semi-annual pay) have a maturity of 15 years and are currently priced at €1.440,03 per bond. The firm also has an issue of 2 million preference shares outstanding with a market price of €12.00. The preference shares offer an annual dividend of €1.20. The firm also has 14 million ordinary shares outstanding with a price of €20.00. Company A is expected to pay a €2.20 ordinary share dividend one year from today, and that dividend is expected to increase by 5 per cent per year forever. If Company A is subject to a 40 per cent marginal tax rate, what is the firm's weighted average cost of capital?

Reference no: EM132947793

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