Marbela Corporation's stock had a required return of 10.75% last year
Marbela Corporation's stock had a required return of 10.75% last year, when the risk-free rate was 5.4% and the market risk premium was 5.5%. Now suppose the market risk premium declines by 1.5%. The risk-free rate and Marbela's beta remain unchanged. What is the company's new required return? (Hint: First calculate the beta, and then find the required return.)
Chu Chu Train Systems is expected to pay a $3.25 annual dividend (D1 = $3.25), the dividend is expected to grow at a constant rate of 6.50% a year, and the common stock currently sells for $65.75 a share. The before-tax cost of debt is 5.50%, and the tax rate is 40%. The target capital structure consists of 40% debt and 60% common equity. What is the company’s WACC if all equity is from retained earnings?
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Rating:
5/
Solution: Solution - Marbela Corporation's and Chu Chu Train Systems