Question $5$

$2$ pts

Ch$.12$: WACC using DGM

A computer hardware company has a target capital structure of $65$ percent common stock, $10$ percent preferred stock, and $25$ percent debt. The company currently just paid a dividend of $$3\mathrm{.}25,$ which they plan to grow $3\%$ indefinitely. Their stock price is currently $$95.$ The cost of preferred stock is $6$ percent, and the before$-$tax cost of debt is $5$ percent. The relevant tax rate is $20$ percent. What is the company's weighted average cost of capital $($WACC$)?$

Note: the final exam will have an easier problem where you are given the cost of equity; however, you will have to calculate $($as you did a homework question$)$ the weight of debt and equity using the debt to equity ratio. The final exam ignores the weight of preferred stock as it is normally zero.

$\backslash$table$[[\%$ in Common Stock,$65\%$