Find what is the cost of each of the capital components

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Ronaldo Fiber Industries, a fiber optic company is considering to optimize its capital structure. Its targeted capital structure consists of 20% debt, 30% preferred stocks, and 50% common stocks. Ronaldo Fiber Industries has been paying dividend 30% of its net income regularly. Current stock price is Rs. 54, and a constant growth rate is 9%. Metal fiber Industries expecting next year earning to be Rs. 44,000,000. Last year dividend paid Rs. 3.60 by the company. Corporate tax rate is 40%. Metal Fiber Industries issued bonds of 12 years with coupon rate of 10% and currently trading at a price of 945. They are also considering to issue new preferred stock at 11%.

Required:

Question 1: What is the cost of each of the capital components of Ronaldo Fiber Industries?

Question 2: What is Ronaldo Fiber Industries' WACC?

Reference no: EM132589480

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