Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $72 a share. The before-tax cost of debt is 6% and the tax rate is 34%. The target capital structure consists of 30% debt and 70% equity. What is the company's weighted average cost of capital?
Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $72 a share. The before-tax cost of debt is 6% and the tax rate is 34%. The target capital structure consists of 30% debt and 70% equity. What is the company's weighted average cost of capital?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 4P
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Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $72 a share.
The before-tax cost of debt is 6% and the tax rate is 34%.
The target capital structure consists of 30% debt and 70% equity.
What is the company's weighted average cost of capital?
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