What is your best estimate of the company cost of equity

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Reference no: EM132049349

A. Preston Industries has a WACC of 11.08 percent. The capital structure consists of 60.0 percent equity and 35.0 percent debt. The aftertax cost of debt is 5.5 percent and the cost of equity is 14.20 percent. What is the cost of preferred stock?

B. Jungle Joe’s has a debt-equity ratio of 0.50. The firm has a flotation cost of debt of 6.3 percent and a flotation cost for equity of 12.52 percent. How much does the firm need to borrow to fully fund a project that has an initial cost of $62.5 million?

C. Stock in Daenerys Industries has a beta of 1.1. The market risk premium is 7 percent, and T-bills are currently yielding 5.2 percent. The company’s most recent dividend was $1.60 per share, and dividends are expected to grow at an annual rate of 6 percent indefinitely.

If the stock sells for $40 per share, what is your best estimate of the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Reference no: EM132049349

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