7-Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow...

7-Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a constant rate of 5% indefinitely. Today’s market price/share is $45. Suppose also that your company has some bonds outstanding in the market selling for $1,035. The bonds have 8 years left to maturity, with 8% coupon rate with semi-annual payments. If your company’s capital structure is 35% debt and 65% equity, with the tax rate of 40% what is the WACC?

Your company’s target capital structure is 35% debt, 15% preferred, and 50% common equity. The yield to maturity on the debt is 7.50%, the return on the preferred is 7.00%, the cost of retained earnings is 12.5%, and the tax rate is 40%. The firm will not be issuing any new security. What is the WACC?

Expert Solution

jeff jeffy answered 1 year ago

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