In: Finance
Caspian Sea Drinks' is financed with 60.00% equity and the remainder in debt. They have 10.00-year, semi-annual pay, 5.80% coupon bonds which sell for 97.91% of par. Their stock currently has a market value of $24.05 and Mr. Bensen believes the market estimates that dividends will grow at 3.56% forever. Next year's dividend is projected to be $2.66. Assuming a marginal tax rate of 20.00%, what is their WACC (weighted average cost of capital)?
Weighted average cost of capital WACC:
A | B | C | D |
Particulars | Weight | Rate | Weighted rate |
Debt | 40.00% | 4.94% | 1.98% |
Equity | 60.00% | 14.62% | 8.77% |
WACC | 10.75 |
Wweighted average cost of capital (WACC) 10.75%.
So, the solution formulae are:
Hence, the weighted average cost of capital (WACC) 10.75%.
Weighted average cost of capital (WACC) 10.75%.