MBA 620 - The firm decides to raise $30 million by selling equity and debt.
Question # 00538405
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Updated on: 06/02/2017 12:08 AM Due on: 06/02/2017
The firm decides to raise $30 million by selling equity and debt. The investment bankers hired by your firm contact potential investors and come back with the following numbers:
- Debt that pays $1 million coupons a year and $18 million maturity value after 10 years will sell for $20 million.
- Equity that pays expected dividends of $1.2 million starting next year and growing at a rate of 3 percent per year thereafter sells for $10 million.
Question 12: Calculate the cost of debt, equity, and the WACC.
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Solution: MBA 620 - The firm decides to raise $30 million by selling equity and debt.