Question
Adams Corporation's outstanding bonds are selling at $ 900. The bonds have a face value of 1000, annual coupon rate of 7%, and 10 years
Adams Corporation's outstanding bonds are selling at $ 900. The bonds have a face value of 1000, annual coupon rate of 7%, and 10 years until maturity. New bonds will be as risky as the old bondsHowever, the will incur foration costs 5% on new bond issue. Its tax rate is 20%. It can sell new preferred stock at 100 per share with a dividend rate of 10%. However, the firm incur flotation costs of 10% on new preferred stock. AC's common stock currently sells for $30.00 per share the next expected dividend per share D 1 is 3.00and the dividend is expected to grow at a constant rate of 5% per year plans to raise its equity capital by retaining earnings. The target capital structure consists of 30% debt 10% preferred stockand 6% common equity . What is Adams' WACC ?
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