Solve this b. Jade Works maintains a debt-equity ratio of 0.65 and has a tax rate of 32 percent. Thefirm does not issue preferred stock. The pre-tax cost of debt is 9.8 percent. There are25,000 shares of stock outstanding with a beta of 1.2 and a market price of RM19 ashare. The current market risk premium is 8.5 percent and the current risk-free rate is3.6 percent. This year, the firm paid an annual dividend of RM1.10 a share andexpects to increase that amount by 2 percent each year.Required:Using an average expected cost of equity, what is the weighted average cost ofcapital?c. Below is the balance sheet for Bersatu Corporation. There are 11,000 shares of stockoutstanding. The company has declared a dividend of RM1.60 per share. The stockgoes ex dividend tomorrow. Ignore any tax effects.Market Value Balance SheetRM 42,500280,000RM 322,500CashFixed AsetEquityTotalRM322,500RM322,500TotalRequired:i. What is price of the stock selling for today.ii. Calculate the stock selling tomorrow.iii. Bersatu-Teguh Corporation has announced it is going to repurchase RM9,200worth of stock. Calculate the shares outstanding.iv. Calculate price per share after the repurchase

The weighted average cost of capital would be considered as the cost of each raised funds considered…

b. Jade Works maintains a debt-equity ratio of 0.65 and has a tax rate of 32 percent. The firm does not issue preferred stock. The pre-tax cost of debt is 9.8 percent. There are 25,000 shares of stock outstanding with a beta of 1.2 and a market price of RM19 a share. The current market risk premium is 8.5 percent and the current risk-free rate is 3.6 percent. This year, the firm paid an annual dividend of RM1.10 a share and expects to increase that amount by 2 percent each year. Required: Using an average expected cost of equity, what is the weighted average cost of capital?

b. Jade Works maintains a debt-equity ratio of 0.65 and has a tax rate of 32 percent. The firm does not issue preferred stock. The pre-tax cost of debt is 9.8 percent. There are 25,000 shares of stock outstanding with a beta of 1.2 and a market price of RM19 a share. The current market risk premium is 8.5 percent and the current risk-free rate is 3.6 percent. This year, the firm paid an annual dividend of RM1.10 a share and expects to increase that amount by 2 percent each year. Required: Using an average expected cost of equity, what is the weighted average cost of capital?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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