Question
Tysseland Companys present market value capital structure shown below is considered to be optimal. There is no short-term debt: Capital Component Market value Debt 30,000,000
Tysseland Companys present market value capital structure shown below is considered to be optimal. There is no short-term debt: Capital Component Market value Debt 30,000,000 Common equity 30,000,000 Total 60,000,000 New bonds will have an 8% coupon rate, and they will be sold 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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