What is the firm's weighted average cost of capital if: The company aims for...
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What is the firm's weighted average cost of capital if: The company aims for a capital structure consisting of 50% long-term bank borrowings, 20% preferred shares, 10% new common shares, 20% retained earnings. The company's tax rate is 0.25. The bank lending rate is 3%. New preferred share capital can be sold to investors at a price of 12 euros per share, with a fixed annual dividend of 0.3 euros. The new preferred shares will have issuance and distribution costs equal to 4 euros per preferred share. The current market price of the common stock is 20 euros, the dividend per share that the company (Do) has just distributed is 0.30 euros per share and it is expected that this dividend will increase in the future at an annual rate of 4%. The new shares will have an issue and disposal fee of 8% of the current market value of the share.
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