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Q4. Long term capital structure of company KL is given below: The interest rate for debt is 10%, and the dividend for common stock is
Q4. Long term capital structure of company KL is given below: The interest rate for debt is 10%, and the dividend for common stock is $2 per share and $2.5 per share for preferred stock, respectively. The preferred stock price is $20/ shareand common stocksare currently trading for $18/ share. Thenet income of the Company is expected to be paid out 40% as dividends and 60% will be added to the retained earnings. The IRR of the company has been measured as 15%. Suppose that the average income tax ratio is 30% and the corporate tax ratio is 25%, calculate and interpret the WACC of the Company. Q4. Long term capital structure of company KL is given below: The interest rate for debt is 10%, and the dividend for common stock is $2 per share and $2.5 per share for preferred stock, respectively. The preferred stock price is $20/ shareand common stocksare currently trading for $18/ share. Thenet income of the Company is expected to be paid out 40% as dividends and 60% will be added to the retained earnings. The IRR of the company has been measured as 15%. Suppose that the average income tax ratio is 30% and the corporate tax ratio is 25%, calculate and interpret the WACC of the Company
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