Information: Z Corp. stock currently trades at $45.50 per share. At the end of t

Question

Information:

Z Corp. stock currently trades at $45.50 per share. At the end of the year, Z Corp. is expected to pay an annual dividend of $4.40 per share (D1=$4.40), and the firm's dividend is expected to grow at a constant rate of 4% per year. Retained earnings are 13.67%. Cost of new common stock (re) is: 14.74%

Question:

Fletcher has forecasted net income of $500 million and a cpaital budget of $800 million for next year. Fletcher's target capital structure consists of 65% debt and 35% equity. The firm also plans to keep its dividend payout ration fixed at 35%. What is the relevant cost of common equity to be used in calculating Fletcher's weighted average cost of capital (WACC) on the last dollar it raises? (Need a percent value)

Explanation / Answer

elevant cost of common equity to be used in calculating Fletcher's weighted average cost of capital (WACC) on the last dollar it raises = 14.74%

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