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Mini Case for Weighted Average Cost of Capital Suppose your team is in the process of putting together your proposals for the strategic planning of
Mini Case for Weighted Average Cost of Capital Suppose your team is in the process of putting together your proposals for the strategic planning of your company for next year. You would like to start your analysis by estimating the cost of capital of the company. Below is relevant information you have gathered: Company's Capital Structure: Long-term Debt (7% annual interest) Preferred Stock (5,000 outstanding shares, $50 par, $1.50 dividend) Common Stock $633,333 250,000 783,334 The company paid dividends to its common stockholders at the rate of 13.57%. The preferred stock has a current market price of $19 per share. The firm's tax rate is 34%. 1. Compute for the WACC of the company. How much profit or savings should you consider of each project that you would propose for next year
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