Dividend growth models to estimate the cost of equity

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Reference no: EM13810406

S. Company has the following capital structure: 45% debt, 15% preferred stock and 40% common stock. Assume the risk-free rate is 8%, the beta stock is 1.3 and the market risk premium (Rm - Rf) is 12%, Determine the weighted average costs of capital (WACC) if you take the average if the CAPM abd dividend growth models to estimate the cost of equity.

- the firm’s 10-year 7% annual coupon bond is currently trading at $717.49.

- the firm’s 10% annual dividend perpetual preferred stock with a par value of $100 is trading at $71.43

- the common stock is trading at $150. Their next dividend is expected to be $5.00. The growth rate is for casted at 10%.

Reference no: EM13810406

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Dividend growth models to estimate the cost of equity : S. Company has the following capital structure: 45% debt, 15% preferred stock and 40% common stock. Assume the risk-free rate is 8%, the beta stock is 1.3 and the market risk premium (Rm - Rf) is 12%, Determine the weighted average costs of capital (..

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