Question
Rollins Corporation is estimating its WACC. Its target capital structure shows $ 400,000 debt and $ 600,000 common equity. Its bonds have 8 percent annual
Rollins Corporation is estimating its WACC. Its target capital structure shows $ 400,000 debt and $ 600,000 common equity. Its bonds have 8 percent annual coupon, paid semiannually. The maturity of the bond is 20 years, and the bond sells at $900. Rollins is a constant-growth firm which just paid a dividend of $2.00, sells for $25.00 per share, and has a growth rate of 8 percent. If the firm issues new common stocks floatation costs will be 10%. The firm's marginal tax rate is 30 percent.
Q3. Calculate WACC of Rollins if internal capital is enough to fund the equity portion of the budget.
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