
Essentials Of Investments
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ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:3. The ELGRAJO Corporation has capital structure as follow (consider is optimal):
25% Debt, 15% Preference Stock, and 60% Common Stock. Totally 100%. Expected net
profit is 17.142.860,- this year. 30% Dividend payout ratio, tax is 40% and investor
expecting an income and growth dividend is 9% (g) on the future.
Last year, company did pay dividend (Do) as 3.600 pershare and in this time sold 60.000
pershare. The free risk Interest rate is 14% (km). The beta stocks of the corporation as 1.51
(bi). This requirements for the new security offering.
Common stock of flotation cost as 10% and
Preferrent stock can be sold to public as 100.000,- pershare,
With dividend as 11.000,- a flotation cost as 5.000,- pershare.
The debt can be sold and interest payment is 12% (Kd)
a. Calculate the component of cost of debt, cost of preferred stock, cost of retain earnings
and cost of new common stock
b. When the corporate needs to cover their own capital with a retain earnings and issuing
new stock, how much the WACC (weigthed average cost of capital)?
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