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Answer key says A but i cannot figure out why. Flaherty Electric has a capital structure that consists of 70 percent equity and 30 percent
Answer key says A but i cannot figure out why. Flaherty Electric has a capital structure that consists of 70 percent equity and 30 percent debt. The company'g long-term bonds have a beforetax yield to maturity of 8.4 percent. The company uses the DCF approach to determine the cost of equity. Flaherty's common stock currently trades at \$45 per share. The year-end dividend (D1) is expected to be $2.50 per ihare, and the dividend is expected to grow forever at a constant rate of 7 percent a year. The company estimates that it will have to insue new common stock to help fund this year'g projects. The flotation coat on new common stock iggued is 10 percent, and the company's tax rate it 40 percent. What is the company'g weighted average coat of capital, kacc? a. 10.73b b. 10.308 c. 11.311 d. 7.404 E. 9.897
Answer key says A but i cannot figure out why.
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