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C2: Your firm has issued 20,000 bonds with a market price of $100 per bond. The firm also has 28,000 common shares outstanding at a
C2: Your firm has issued 20,000 bonds with a market price of $100 per bond. The firm also has 28,000 common shares outstanding at a price of $65 per share. If the common shares will pay a dividend of $4.00 at the end of the year and thereafter dividends will grow at a rate of 3.5 percent. Given that the after-tax yield on the firm's bonds is 7%. Required: Based on the above information, calculate the firm's weighted average cost of capital (WACC) [RC1: 10 marks]
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