ompany has a return on equity of 8.0% and pays out 35.0% of its earnings as dividends. The company is expected to pay a dividend of $2. 25 next year and the current stock price is $30.00. What is the cost of equity of company? A 8.00% B 15.50% C 12.70% D 7.50% E 10.30%

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter9: The Cost Of Capital
Section9.8: The Weighted Average Cost Of Capital (wacc)
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Company has a return on equity of 8.0% and pays out 35.0% of its earnings as dividends. The company is expected to pay a dividend of $2. 25 next year and the current stock price is $30.00. What is the cost of equity of company?

A 8.00%

B 15.50%

C 12.70%

D 7.50%

E 10.30%




Company has a capital structure that uses 25% preferred shares, 40% debt, and 35% common equity. The cost of preferred shares is 8.0%. The debt has a coupon rate of 8.5% and a cost of debt of 7.0%. the cost of common shares is 14.0%. the tax rate is 40%. What is the firms WACC?

A 5.82%

B 8.02%

C 8.94%

D 8.58%

E 9.70%

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