Reference no: EM132819135
Question - Jury Company has the following capital structure based on current market prices: 55% debt, 35% equity, and 10% preferred stock.
Calculate Jury's weighted average cost of capital (WACC) assuming no new common shares are issued, using the answers obtained from question 8 above.
1. Jury Company wants to calculate the component costs in its capital structure.
Common stock currently sells for $27 and is expected to pay a dividend of $0.50.
Jury's dividend growth rate is 8%, and flotation cost is $1.25.
Preferred stock sells for $46, pays a dividend of $4.00, and carries a flotation cost of $1.10.
Jury Company bonds yield 9% in the market. Jury is in the 40% tax bracket.
Calculate after tax cost of debt, cost of common equity (retained earnings), cost of new common stock, cost of preferred stock.
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