Purina want to pursue a project that will broaden the markets in which they currently participate in. They want to know what they should use for a hurdle rate or WACC (weighted average cost of capital).

The following information is from their account:

The dividend growth rate is expected to be 2.2% a year.

Preferred stock sells for $178 and pays annual dividend of $21.

There are currently 20 year 5.77% coupon bonds, with a face value of $1,000, that pay semi-annual payments and are non-callable available at a price of $1,015.25. The bond yield risk premium is 3%.

The current risk free rate is .2% and the market risk premium is 5.7%.

Purina has a target capital structure of 30% debt, 7% preferred stock and 63% common equity.

Purina has a current stock price of $205.44 per share. The stock has Beta of .56 and pays a dividend of $3.84 per year. Purina has a tax rate of 20%.

Clorox wants to pursue a project that will broaden the markets in which they currently participate. They want to know what they should use for a hurdle rate or WACC (weighted average cost of capital) You get the following information from their accountant: The dividend growth rate is expected to be 2.2% a year Preferred stock sells for $178 and pays an annual dividend of $21. There are currently 20 year 5.77%.coupon bonds, with a face value of $1,000, that pay semi-annual payments and are non-callable available at a price of S1,015-25. The boad-yield risk premium is The current risk free rate is 24 and the market risk premium is 5,7% Clorox has a large capital structure of 30% debt.7% preferred stock and 63% common equity Clorox has a current stock price of $205.44 per share. The stock has a Bata of 56 and pays a dividend of 53.84 per year. Clorox has a tax rate of 20%