Reference no: EM131179700
You have following information about the company R.S. Green:
• The company has 250,000 shares of common stock outstanding at a market price of $28 a share. Next year’s annual dividend is expected to be $1.55 a share. The dividend growth rate is 2%.
• The company also has 7,500 bonds outstanding with a face value of $1000 per bond. The bonds carry a 7% coupon, pay interest semiannually, and mature in 7.5 years. The bonds are selling at 98% of face value..
• The corporate tax rate for the company is 34 percent.
1) What is WACC for the company?
2) The company want to raise 5 million in capital, but still maintain its current capital structure. Given that the flotation cost for common stock is 5%, and the floatation cost for bond is 3%, what is the true amount of capital that the company has to raise?
3) The company will invest newly raised capital in a project, which will generate annual cash inflows of 1.2 million for the next 5 years. What are the NPVs of the project before and after adjusted for floatation cost?
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: The company has 250,000 shares of common stock outstanding at a market price of $28 a share. Next year’s annual dividend is expected to be $1.55 a share. The dividend growth rate is 2%. What is WACC for the company? The company want to raise 5 millio..
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