Corcoran Inc. uses the Gordon Growth Model to estimate ks; its current stock price is $30; it expects to pay a dividend of $2.10 in the next year; and it enjoys constant growth of 6 percent. a) What is the cost of retained earnings for Corcoran Inc.? Show your CALCULATION b) Corcoran Inc. has a capital structure composed of 35 percent debt, 15 percent preferred stock, and 50 percent retained earnings. The cost of preferred stock is 7 percent. Calculate WACC using Corcoran's cost of retained earnings as calculated in part a) Show your CALCULATION C) A new capital budgeting project may prompt Corcoran to issue new common stock, with a flotation cost of 10 percent. If Corcoran issues new stock, what is the cost of issuing new common stock, ke? Show your CALCULATION
Corcoran Inc. uses the Gordon Growth Model to estimate ks; its current stock price is $30; it expects to pay a dividend of $2.10 in the next year; and it enjoys constant growth of 6 percent. a) What is the cost of retained earnings for Corcoran Inc.? Show your CALCULATION b) Corcoran Inc. has a capital structure composed of 35 percent debt, 15 percent preferred stock, and 50 percent retained earnings. The cost of preferred stock is 7 percent. Calculate WACC using Corcoran's cost of retained earnings as calculated in part a) Show your CALCULATION C) A new capital budgeting project may prompt Corcoran to issue new common stock, with a flotation cost of 10 percent. If Corcoran issues new stock, what is the cost of issuing new common stock, ke? Show your CALCULATION
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Corcoran Inc. uses the Gordon Growth Model to estimate ks; its current stock price is $30; it expects to pay a dividend of $2.10 in
the next year; and it enjoys constant growth of 6 percent.
a) What is the cost of retained earnings for Corcoran Inc.? Show your CALCULATION
b) Corcoran Inc. has a capital structure composed of 35 percent debt, 15 percent preferred stock, and 50 percent retained earnings.
The cost of preferred stock is 7 percent. Calculate WACC using Corcoran's cost of retained earnings as calculated in part a) Show
your CALCULATION
C) A new capital budgeting project may prompt Corcoran to issue new common stock, with a flotation cost of 10 percent. If Corcoran
issues new stock, what is the cost of issuing new common stock, ke? Show your CALCULATION
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