#9

Sorensen 5ystems Inc, is expected to pay a $2.50 dividend at year end (D1=$2.50), the dividend is expected to grow at a conatant rate of 5.50% a year, and the cammon stock currently sells for $87.50 a share. The belore-tax cost of debt is 7.50%, and the tax rato is 25%. The target capital structure consists of 45% debt and 55% common equity. What is the company's wacc if all the equity used is from retained earnings? Do not round your intermediate calculations. 1. 5.10% 2. 7.13\% t. 6.62\% d. 7.35% 5. 5.69%