A. What sources of capital should be included when you estimate AJAXs weighted average cost of capital (WACC)?
B. What is the market interest rate on AJAXs debt and its component cost of debt?
C. AJAX does not plan to issue new shares of common stock. Using the CAPM approach, what is the AJAXs estimated cost of equity?
D. What is the estimated cost of equity using the constant dividend model?
E. Suppose the firm has historically earned 15 percent on equity (ROE) and retained 35 percent of earnings, and investors expect this situation to continue in the future. How could you use this information to estimate the future dividend growth rate?
F. What is AJAXs WACC?
G. How is any firms stock price (or the value of the firm) related to WACC? Explain in words.
H. How will your estimated WACC be related to increase in expected inflation?
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