S. ALAM group financed using the following weights: 35% long term debt, 15% preferred stock and 40% common stock equity, and 10% retained earnings. The firm’s corporate tax rate is 38% I. The firm can sell for tk. 980 an 8 years bond, Tk. 1000 par-value bond paying at an 11% coupon rate,flotation cost of per bond Tk.15. II. Eight percent (annual dividend) preferred stock having a par value of tk. 100 can be sold for tk. 85. An additional fee of tk. 5 per share must be paid to the underwriters. III. The firm’s common stock currently selling for tk. 50 per share. The dividend expected to be paid at the end of the year is Tk. 5.25 per share. Dividends have been growing at an annual rate of 8%. Moreover, underwriting fees per share Tk. 7. a. Calculate the WACC of the project and implications of investment decisions.
S. ALAM group financed using the following weights: 35% long term debt, 15% preferred stock and 40% common stock equity, and 10%
I. The firm can sell for tk. 980 an 8 years bond, Tk. 1000 par-
II. Eight percent (annual dividend) preferred stock having a par value of tk. 100 can be sold for tk. 85. An additional fee of tk. 5 per share must be paid to the underwriters.
III. The firm’s common stock currently selling for tk. 50 per share. The dividend expected to be paid at the end of the year is Tk. 5.25 per share. Dividends have been growing at an annual rate of 8%. Moreover,
underwriting fees per share Tk. 7.
a. Calculate the WACC of the project and implications of investment decisions.
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