QuestionThe following tabulation gives earnings per share figures for Powell Manufacturing during the preceding 10 years. The firmâs common stock, 140,000shares outstanding, is now selling for Rs.50 a share, and expected dividend forthe coming year (2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers) is 50% of EPS for the year. Investors expect past trends to continue, so âgâ may be based on the historical earnings growth rate.YearEPS (Rs)19982.0019992.1620002.3320012.5220022.7220032.9420043.1820053.432006 – Write a paper; Professional research paper writing service – Best essay writers3.7020074.00The current interest rate on new debt is 8%. The firmâs corporate tax rate is 40%. The firmâs market value capital structure, considered to be optimal, is as follows:DebtRs.3,000,000Common equity7,000,000Total CapitalRs.10,000,000Required:Calculate the firmâs after tax cost of new debt and of common equity, assuming that new equity comes only from reinvested cash flow.( calculate the cost of equity, assuming constant growth model)Find the firmâs WACC, assuming no new common stock is sold.
2 peer responses – due in 4 hours
Guided Response: Respond in a substantive way to at least two of your peers. Choose at least one point from your peer’s response that impacted your thinking on this subject, and explain why and how that particular comment resonated with you or caused you to think in a different way. Compare the implications for […]