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Hunter Loper hw 7 sp 2020 fin 410 - Saved. View Help Search 2+ AaBbcc AaBbcc AaBC AaBbcc AaB AaBbc ABCD ABCDE A T Normal No Spac... Heading 1 Heading 2 Title Subtitle Subtle Em... Emphasis int O T Styles Instructions: Show all of your work for maximum credit. (Be sure to consider all methods for calculating cost of equity if there is enough information). You may use a financial calculator and show your entries (i.e., FV = 1000, etc). There are 25 points possible. 1. (10 points) Copper Creek Industrial is in the process of expanding and raising new capital through an initial public offering of common equity. The company has a target capital structure consisting of a debt to value (wa) ratio of 35%. A current debt issue has a face value of $1,000 and annual coupon of 7.60% which is paid semi-annually. It has 20 years remaining to maturity and it currently sells for $1.035. Flotation costs of the new issue of stock are expected to be 5% and using the pure play method with similar firms the stocks beta is estimated at 1.30. The investment bank believes the stock can sell at $25 per share. The company is expected to pay a dividend of $1.00 next year and it should grow at 7% per year indefinitely. If the tax rate is 34%, what is the weighted average cost of capital? 2._15 points) You are an outside analyst attempting to estimate the cost of capital for RRC Industrial. You do not know the corporation's target capital structure. However, the balance sheet shows a total of $55 million of long term debt with a coupon rate of 8%. The yield to maturity is 720% (before tax) and the total current market value is S60 million. The balance sheets also show the total of common stock and retained earnings is $60 million. The company's stock has a beta of 1.80 and the stock price is $12.00 per share. There are 8 million shares of stock outstanding, and the current risk free rate is 3%. The company recently paid a dividend of 50.70, and they typically pay out about 20% of their earnings in cash dividends. RRC's return on equity is 10% and the expected return on the market is 9.00%. What is your estimate of RRC's weighted average cost of capital if their marginal tax rate is 40%

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