National Co., a company with a 25% debt-to-equity ratio, has a weighted average cost of capital of 9%. The firm is growing at a constant rate and does not issue any preferred shares. The after-tax cost of debt is determined at 9%. The expected dividend to be declared by National Co. is P2 and growth rate is 1%. How much is the current price of the ordinary share?

National Co., a company with a 25% debt-to-equity ratio, has a weighted average cost of capital of 9%. The firm is growing at a constant rate and does not issue any preferred shares. The after-tax cost of debt is determined at 9%. The expected dividend to be declared by National Co. is P2 and growth rate is 1%. How much is the current price of the ordinary share?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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