Question: In March of 2016 the capital structure of IT solutions (measured in market values) appears as follows:
|
Thousands of dollars
|
Book Value
|
Market Value
|
|
Accounts Payable
|
50,000
|
50,000
|
|
Common Equity
|
500,000
|
750,000
|
|
Long-Term Debt
|
600,000
|
600,000
|
|
Total assets
|
1,150,000
|
1,400,000
|
Calculate the appropriate weights of debt and equity in the capital structure of the company?
Company's common stock currently sells $12.00 per share. The firm pays dividends annually and expects dividends to grow at a constant rate of 3% indefinitely. The most recent annual dividend per share, paid yesterday, is $1.00. Calculate the cost of common equity?