Question
Tysseland Companys market and book value capital structures are shown below. There are no preferred stock and short-term debt: Capital Component Market value Book Value
Tysseland Companys market and book value capital structures are shown below. There are no preferred stock and short-term debt:
| Capital Component | Market value | Book Value |
| Debt | $5,000,000 | $5,000,000 |
| Common equity | $60,000,000 | $40,000,000 |
Bonds have an 8% coupon rate, and they sell at par. Common stock is currently selling at $30 a share. The stockholders required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected growth rate of 8%.(The next expected dividend is $1.20, so the dividend yield is $1.20/$30 = 4%.)The marginal tax rate is 40%. What is Tysselands WACC?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
