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Unformatted text preview: RF RP M r S D 1 r s PART F What is the bond-yield-plus-risk-premium estimate for Colemans cost of common equity? "Bond yield + RP" premium 4% 14.00% PART G METHOD ESTIMATE CAPM 14.20% DCF 13.80% 14.00% Average 14.00% PART I % Flotation cost 15% A-F proceeds from issue $42.50 15.35% PART J What is Colemans overall, or weighted average, cost of capital (WACC)? Ignore flotation costs. 30% 6.00% 10% 9.00% WACC = 11.10% 60% 14.00% k s = What is your final estimate for r s ? r d + RP (2) Coleman estimates that if it issues new common stock, the flotation cost will be 15%. Coleman incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost? r s w d A-T r d w p r p w s r s...
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