Alpha Geek

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    Polytechnic State University Sanluis
    Jan-2006 - Nov-2010

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    Polytechnic State University
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Category > Business & Finance Posted 03 Aug 2017 My Price 5.00

The firm decides to raise $30 million by selling equity and debt. The investment bankers hired

The firm decides to raise $30 million by selling equity and debt. The investment bankers hired by your firm contact potential investors and come back with the following numbers: Debt that pays $1 million coupons a year and $18 million maturity value after 10 years will sell for $20 million. Equity that pays expected dividends of $1.2 million starting next year and growing at a rate of 3 percent per year thereafter sells for $10 million. Calculate the cost of debt, equity, and the WACC.

Answers

Alpha Geek
(8)
Status NEW Posted 03 Aug 2017 05:08 PM My Price 5.00

Cos-----------t o-----------f d-----------ebt-----------: P-----------V =----------- 20----------- mi-----------lli-----------on -----------PMT----------- = -----------1 m-----------ill-----------ion----------- FV----------- = -----------18 -----------mil-----------lio-----------n N----------- = -----------10 -----------R =----------- ? -----------Usi-----------ng -----------exc-----------el -----------fun-----------cti-----------on,----------- R -----------= R-----------ate-----------(N,-----------PMT-----------,PV-----------,FV-----------) R-----------ate-----------(10-----------,-1-----------,20-----------,-1-----------8) -----------= 0-----------.04-----------17 -----------= 4-----------.17-----------%

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