FINANCE !!! help...urgent :(
hi, can help me to solve this problem pls?i have an exam few days later :(question1 :
1. your firm has a target capital structure of 40% debt and 60% common equity, with no preferred stock. its before-tax cost of debt is 12%, and its marginal tax rate is 40%. the current stock price is $ 22.50. the last dividend is $2.00. it is expected to growth at a constant rate of 7%. what is the cost of common equityand its WACC?
question 2:
2. Y software Co, is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt and 75% equity. The CEO believes that the company should use more debt.
the risk- free rate is 5%, the market risk premium is 6%, and the firm's tax rate is 40%.
currently, its cost of equity is 14%, which is determined by the CAPM. what would the company's estimated cost of equity be if it changed its capital structure to 60% debt and 40% equity?
THANKS !!!
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