The corner bakery has a debt-equity ratio of 062 the firms

Reference no: EM13619751

A. The DJH Corporation just paid a dividend of $ 2.75 . It expects its cash dividends to grow 6.0 % per year forever. DJH has a debt ratio of L = 43 %. Its borrowing rate is rd = 6.8 %. DJH pays corporate taxes at the rate of 37 %, rf = 4.3 %, rM = 11.5 %, and DJH's common stock is currently selling for $ 21 per share. What is DJH's expected cost of stock? Show answer to the nearest .1%

B. The Corner Bakery has a debt-equity ratio of 0.62. The firm's required return on assets is 14.2 percent and its cost of equity is 16.1 percent. What is the pre-tax cost of debt based on M & M Proposition II with no taxes?

Reference no: EM13619751

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