WACC Question: Hester's capitalization is a follows: Common Stock - $10 par value 5,000,000 shares authorized, 2,100,000 issued and 2,000,000 outstanding with a market price of $75 per share. $100, 10% Preferred stock - 200,000 shares authorized, issued and outstanding market price is at par. 5% Bonds $75,000,000 par value, trading at 94 and yielding 8.5% The current risk premium is 6% and the company tax rate is 20%. 1. What is the WACC using the above information? 2. How would your answer change if you were asked to compute the Rs using Constant Growth and the current dividend is $3.00 with the expected growth rate of 7% 3. Based upon your computations in question 1 & 2 above does it make sense to use 11% as the discount rate for the scenario analysis? Explain your