FINANCE-Company AFLAC had issued a 12-year coupon bond with 8% coupon rate

QUESTION

Company AFLAC had issued a 12-year coupon bond with 8% coupon rate on the face value as $1,000 and with semi-annual payments. Answer the following questions:a) The company also issued a common stock of $0.45 dividend with 10% growth rate for the coming 3 years and possibly smoothed out toward 5% from the 4th year and on. There is also one preferred stock issued with preferred dividend as $1.2 and preferred stock price as $10 per share. The current common stock price is $14.20/ per share, the corporate income tax rate is 25%. What is the Weighted Average Cost of Capital (WACC) for Company AFLAC if there are 5 million share of common stock issued and 1 million shares of preferred stock issued?b) What are the assumptions for Weighted Average Cost of Capital (WACC)?

ANSWER:

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