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Thompson Co. has a beta of 1.35. The market risk premium is 8.5%.
Thompson's next annual dividend is expected to be $2.40, paid in exactly one year. Dividends are expected to grow at 6% per year indefinitely. The company's bonds have a coupon rate of 8% and are priced in the market at par value. The company's weighted average cost of capital (WACC) is 10%, and its tax rate is 25%. Thompson's current share price is $40 per share.
What is Thompson's cost of equity capital? [Express your answer in percentage terms (i.e. 58%), rounded to the closest whole number with no decimals]
Cost of equity capital = %
What is Thompson's market value debt-equity (D/E) ratio? [Express your answer in DECIMAL terms (i.e. 4.56), rounded to 2 (TWO) decimals places]
D/E ratio =
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