Question:
Whitewall Tire Ltd just paid a $1.60 dividend on its ordinary shares. If Whitewall is expected to increase its annual dividend by 2 per cent per year into the foreseeable future and the current price of Whitewall Tire Ltd’s ordinary shares is $11.66, what is the cost of ordinary equity for Whitewall Tire Ltd.
Kresler Autos has preference shares outstanding that pay annual dividends of $12, and the current price of the shares is $80. What is the after-tax cost of new preference shares for Kesler Autos if the flotation (issuance) costs for a new issue of preference shares are 5 per cent.13.9 Your manager just finished calculating your company’s weighted average cost of capital. He is relieved because he says that he can now use that cost of capital to evaluate all projects that the company is considering for the next 4 years. Evaluate that statement