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Equity comprises of 70% of total capital (Total Capital = D+E). The firm does not have preferred stock. The firms bonds yield 9% before taxes.

  1. Equity comprises of 70% of total capital (Total Capital = D+E). The firm does not have preferred stock. The firms bonds yield 9% before taxes. Tax rate is 40%. Next time period dividend is forecasted at $ 0.80 per share and is expected to grow at a constant rate of 9% per year for a considerable period. Current stock price is $25. Find the WACC.

2. Famas Llamas has a WACC of 11.20%. Cost of equity is 15%, cost of debt is 8%, tax rate is 35%: Find the Debt-Equity ratio for Famas Llamas.

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