Solution-Weighted average cost of capital for longstreet

Weighted average cost of capital for longstreet

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Reference no: EM131721682

Longstreet Communications Inc. has the following capital structure: Debt 25%; Preferred Stock 15%; and Common Stock 60%. The company has a dividend payout ratio of 30%, and a tax rate of 40%. Last year Longstreet paid $3.60 dividends per share and dividends are expected to grow at 9% in the future. Their common stock currently sells at $60 per share; preferred stock sells at $100 per share with $11 dividend. Before tax cost of debt is 9%

a) Calculate the after-tax cost of debt, cost of preferred and cost of common stock.

b) What is the weighted average cost of capital for Longstreet?

Reference no: EM131721682

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Weighted average cost of capital for longstreet

Reference no: EM131721682

Reference no: EM131721682

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