Question

Jaret & Sons's common stock currendy trades ut $32.00 share. It is expected to pay annual dividend of $1.50 share at the end of the year (0, - $1.50), and the constant growth rate is What is the company's cost of common equity of all of its equity comes from retained earnings? Do not round Intermediate calculations. Round your answer to two decimal places. of the company issued new stock, it would incur an 8% flotation cost. What would be the cost way from new mock? Do not round intermediate calculations. Round your answer to the decimal places

Answer 1

In case of jarret and sons it is provided that d=1.50,growth rate=7%,stock price=$32.
computation of cost of equity of Jarett & Sons Ke = growth rate. Dividend t Share price if all equity comes from retained earnings if it comes from new issue with 8°% flotation cost Ke = 1.50 +4% 32 = 8.69% Ke = 1.50 +4% 29144 = 9.095% (Here Stock price is after deduction of floatation cost

computation of cost of equity and wAIC of Palenda paints corporation Re =D to given that Do = $3.50, 9=7% S = $34.50, tax rare = 25%, Di = DO CI+g) Cost of debt € pre tax) = 12% = 3.50 (1+0.07) DI = 3,745 so we have.) Ke= 3.745 +007 » Ke = 17.86% 34.50 computation of WACC component ratio individual cost WACC equity 0.60 17.86% 10.716% debt 0.40 - 12%(100-25%) = 9% 3.60% Too Ko= 14.316%