Proctor-Gamble, one of the worlds largest Consumer Products companies; is thinking about acquiring Scrub-Daddy. To...
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Accounting
Proctor-Gamble, one of the worlds largest Consumer Products companies; is thinking about acquiring Scrub-Daddy. To help your team evaluate what the P-G offer may look like, the CFO has asked you to do an analysis of the current Cost of Capital for P-G, based on their publicly available information, (conveniently provided below).
Proctor-Gamble
Stock Price
70
# shares Outstanding
250,000
Corporate Tax Rate =
25.00%
Risk-Free Rate
3.00%
Mkt Price
Par Value
(% of Par)
10 yr Zero Coupon
10,000,000
50.00
20 Yr (semi-annual,)
10,000,000
70.00
20 yr bond Coupon Rate
5.00%
Preferred Shares
10,000,000
120.00
Pref. Pmt Rate
7.00%
Stock Returns
PG
SPY
Year
1
16.0%
11.0%
2
15.0%
10.0%
3
-4.0%
4.0%
4
6.0%
3.0%
What is the Corporate Over-all Weighted Average Cost of Capital for P-G?
Answer & Explanation
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