The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable future. The stock of the GİN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. (A)The weighted average cost of capital is 9.50% (B) The weighted average cost of capital is 8.39% (C) The weighted average cost of capital is 8.00% (D)The weighted average cost of capital is 5.60%
The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable future. The stock of the GİN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. (A)The weighted average cost of capital is 9.50% (B) The weighted average cost of capital is 8.39% (C) The weighted average cost of capital is 8.00% (D)The weighted average cost of capital is 5.60%
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 4P
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Transcribed Image Text:The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a
foreseeable futuré. The stock of the GiN Corp. is currently selling at a market price of
$40. The company recently expanded its operations by issuing 10-year Corporate bond at
par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio
of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average
cost of capital of the company?
Calculate the weighted average cost of capital.
(A) The weighted average cost of capital is 9.50%
(B) The weighted average cost of capital is 8.39%
(C) The weighted average cost of capital is 8.00%
(D) The weighted average cost of capital is 5.60%
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