• A corporation has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity, a $1,000 face value, and a $1,100 market price.
• The companys 500,000 shares of common stock sell for $25 per share and have a beta of 1.5. The risk free rate is 4%, and the expected return on the market is 12%.
• The company recently paid a dividend of $2.0 per share on the common stock. The expected dividend growth rate is 7%.
• The company takes the average of cost of equity calculations from DGM and CAPM models to determine cost of equity for WACC.
• Assuming a 40% tax rate, what is the companys WACC?