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Cost of equity and WACC

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10- 2 COST OF PREFERRED STOCK
Tunney Industries can issue perpetual preferred stock at a price of $ 47.50 a share. The stock would pay a constant annual dividend of $ 3.80 a share. What is the company's cost of preferred stock, rp?

10- 4 COST OF EQUITY WITH AND WITHOUT FLOTATION
Javits & Sons' common stock currently trades at $ 30.00 a share. It is expected to pay an annual dividend of $ 3.00 a share at the end of the year ( D1 =$ 3.00), and the constant growth rate is 5% a year.
a. What is the company's cost of common equity if all of its equity comes from retained earnings?
b. If the company issued new stock, it would incur a 10% flotation cost. What would be the cost of equity from new stock?

10- 7 COST OF COMMON EQUITY WITH AND WITHOUT FLOTATION
The Evanec Company's next expected dividend, D1, is $ 3.18; its growth rate is 6%; and its common stock now sells for $ 36.00. New stock ( external equity) can be sold to net $ 32.40 per share.
a. What is Evanec's cost of retained earnings, rs?
b. What is Evanec's percentage flotation cost, F?
c. What is Evanec's cost of new common stock, re?

10- 8 COST OF COMMON EQUITY AND WACC
Patton Paints Corporation has a target capital structure of 40% debt and 60% common equity, with no preferred stock. It's before- tax cost of debt is 12%, and its marginal tax rate is 40%. The current stock price is P0 = $ 22.50. The last dividend was D0 = $ 2.00, and it is expected to grow at a 7% constant rate. What is its cost of common equity and it's WACC?

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Solution Preview

10-2
Preferred stock is a perpetuity. For a perpetuity, the cost is given as Annual Dividend/Price
Cost of preferred stock = 3.80/47.50 = 8.0%

10-4
a. Using the constant growth formula,
Cost of equity = D1/P0 + g
where D1 = expected dividend = $3.00, P0 = ...

Solution Summary

The solution explains how to calculate the cost of preferred stock, common stock and the WACC

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Cost of equity wacc and unleveared cost of equity

Need to calculate the cost of equity, wacc, and unleavered cost of equity for senior housing Properties trust. I have downloaded the financial statements for this company.

Cathy Kendall
Unit One Individual Project: Financial Analysis Introduction
FIN620-1101C

Senior Housing Properties Trust
Consolidated Statement of Income
(In thousands, Except Per Share Amounts)

Year Ended December 31,
2009 2008 2007
Revenues
Rental income 296,777 233,210 185,952
Interest and other income 1,003 2,327 2,070
Total Revenues 297,780 235,537 188,022

Expenses:
Property operating expenses 14,273 2,792 -
Interest 56,404 40,154 37,755
Depreciation 78,583 60,831 47,384
Acquisition Costs 3,327 - -
General and Administrative 20,345 17,136 14,154
Impairment of assets 15,530 8,379 1,400
Loss on early extinguishment of debt - - 2,026
Total Expenses 188,462 129,292 102,719

Income before gain of sale of properties 109,318 106,245 85,303
Gain on sale of properties 397 266 -
Net Income: 109,715 106,511 85,303

Weighted average shares outstanding 121,863 105,153 83,168

Basic and diluted earnings per share:
Income before gain on sale of properties $0.90 1.011 1.03
Gain on sales of properties - - -
Net Income $0.90 1.011 1.03

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