I am stuck on a FIN question that I need help with.
The question reads: Use the answers to questions 1
and 2 and calculate the cost of capital of this company. The company has 1000 shares, the corporate tax rate is 34%.
THIS IS ONLY ONE QUESTION I NEED HELP WITH but it refers to questions 1 and 2 which are shown below:
QUESTION 1 is What is the cost of equity of a company whose shares are trading at 30.2 and which pays a dividend of 5 over 5 years and 6 after 5 years? THE ANSWER TO THIS QUESTION IS 18.00%.
QUESTION 2 is What is the cost of debt for a company whose debt at 11% has a nominal value of 1000, is trading at 1037.9 and has a life of five years (redemption at maturity)? THE ANSWER TO this question is 10.00%.
I asked this question yesterday but it was returned twice for additional information. I don’t have any other information on this.
Our notes show the correct answer to QUESTION that I need help with (that is Use the answers to questions 1 and 2 and calculate the cost of capital of this company…) and the correct answer in the notes is 17.62%. Can you please help with a step by step on how this 17.62% was reached.
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