Estimate the Weighted Average Cost of Capital (WACC) for this companys upgrade project.

Company will blend 40.00% debt (long-term corporate bonds), 30.00% new retained earnings as internal equity (internal common equity), and 30.00% external equity (new common stock issuances). Assume this company is not going to use preferred stock to find this upgrade project.

• Wants to issue 10 year corporate bond at $1,000 price with a 15.00% coupon rate and the issuance cost of each bond is $20. kdbt is estimated as 6.84%
• Wants to reinvest its retained earnings by selling for its common stock for $56.00. This stock pays a current dividend of $0.20 per share and earnings and dividends are expected to grow at 10.00% rate into foreseeable future.
• Common stock is currently selling for $39.00 per share. Stock expects to pay a current dividend of $1.60 per share and earnings and dividends are expected to grow at 7.00% rate. The issuance costs on this stock are $2.00 per share.

To fill out in excel for each of these:

Capital Acquisition and Allocation & Estimation of the Cost of Capital (WACC)After-tax Cost of Debt

• M
• P0
• Pnet
• Ck
• Dbt
• Kd

• Cost of New Retained Earnings (Internal Common Equity)
• d0
• d1
• P0
• G
• ke

• Cost of External Equity (New Common Stock issuances)
• P0
• Pnet
• d0
• d1
• g
• kne

• The Cost of Capital (WACC)
• Ka