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Cost of Capital Example Given the following information about Dunder-Mifflin Inc., calculate the weighted average cost of capital (WACC). Assume a tax rate of 34%.
Cost of Capital Example Given the following information about Dunder-Mifflin Inc., calculate the weighted average cost of capital (WACC). Assume a tax rate of 34%. Dunder-Mifflin will maintain its current capital structure. Common Stock: Dunder-Mifflin has 10 million shares of common stock selling for $25 per share; the beta is 0.95; the next expected dividend (in exactly one year) is $1.75 per share. The growth rate in dividends is 4%. Debt: The market value of Dunder-Mifflin's debt (bonds) is $98.5 million. Dunder- Mifflin's bonds pay a 6% coupon semiannually, have 10 years to maturity, and have a $1,000 par value. Currently the bonds are selling for $985. Market: The market risk premium is 7.4% and the risk-free rate of return is 4%
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