Estimate a company’s cost of capital based on 32% tax rate and the following:
1. Company’s $8 million, 10% coupon, semi-annual payment, non-callable bonds, with 12 years left to maturity are currently trading at 0.96.
2. Company’s 50,000 preferred stock are currently trading at $22 each when the par value is $20 and there’s 5% annual dividend.
3. Company’s 250,000 common stock are currently trading at $40 per share. Its most recent quarterly dividend was $0.50 per share, which is expected to grow at a constant rate of 4%. Its beta is 1.1 and treasury yield and the market risk premium are 2.5% and 6%, respectively.
Based on your above calculation, provide the best estimate of the company’s EPS, Net Income, EBIT and FCF and comment on its growth rate.