FIN 302 - Montafiori Inc. has a target capital structure (in market values) of 60% debt and 40% equity.
Question # 00676261
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Updated on: 04/24/2018 08:32 AM Due on: 04/24/2018
Montafiori Inc. has a target capital structure (in market values) of 60% debt and 40% equity. The firm's debt consists of 8 year, annually payable bonds with a coupon rate of 7%, and the bonds are actually traded at 106% of par value.
Montafiori's stock currently sells for $100 per share and the last dividend paid (=D0) was $5.00. Investors expect the dividend to grow indefinitely at a constant rate of 10% per year. The company's tax rate is 40%. What is the cost of equity? What is the WACC?
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Rating:
5/
Solution: FIN 302 - Montafiori Inc. has a target capital structure (in market values) of 60% debt and 40% equity.