Unformatted text preview: on 30 year U.S. Treasury bonds is 5% (r Rf ), and the return on the S&P 500 index is 12%. What is the cost of retained earnings? r i = r Rf + (r m – r Rf ) b Title: Cost of External Equity 5. The company just paid dividend of $2.0 per share and expected to grow at 10 percent. This common stock is currently selling for $60. What is the company’s cost of equity using constant growth model (Gordon growth model)? If flotation cost is 10% of price, then what is the cost of equity? Title: Weighted Average Cost of Capital 6. The target capital structure for KM is 40% stock, 10 % preferred stock, and 50% debt. If the cost of equity is 18 percent, the cost of preferred stock is 10 percent, and the before tax cost of debt is 8 percent, and the tax rate is 40 percent, what is KM’s WACC?...
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This note was uploaded on 12/13/2011 for the course MANAGEMENT 103 taught by Professor Mr.singh during the Spring '11 term at Aristotle University of Thessaloniki.
- Spring '11