Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent...

Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent common stock.

The company can issue bonds at a yield to maturity of 10% percent.
The cost of preferred stock is 12 percent.
The company's common stock currently sells for $40 a share.
The company's dividend is currently $1.50 a share (D₀ = $1.50), and is expected to grow at a constant rate of 8 percent per year.
Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued.
The company’s tax rate is 25 percent.

What is the company’s weighted average cost of capital (WACC)? Show work.

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jeff jeffy answered 6 months ago

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Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent...

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