Question
The firms corporate tax rate equals 30% The firm has an outstanding bond issue with remaining maturity of 8 years, with a coupon rate of
The firms corporate tax rate equals 30%
The firm has an outstanding bond issue with remaining maturity of 8 years, with a coupon rate of 10 percent paid semi-annually, a face value of $1,000 that currently sells for $1,040.
Their current preferred stock outstanding sells for $50 and earns a dividend of $4.00
Their common stock sells for $40 per share currently, just paid an annual dividend of $6.50 per share, and has a dividend growth rate of 7% per year.
The flotation cost of new equity is 7%.
Optimal capital structure is 10% debt, 20% preferred stock, 40% retained earnings, and 30% new equity.
What is the WACC for the firm based on the firm utilizing the optimal capital structure above ?
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