Question
You have collected the following data about a company. The yield on the company's outstanding bonds is 7.65%, its tax rate is 40%, the next
You have collected the following data about a company. The yield on the company's outstanding bonds is 7.65%, its tax rate is 40%, the next expected dividend is $0.75 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $15.00 per share, the flotation cost for selling new shares is 10% (i.e., F = 10%). If the company wants to use 49% debt and 51% common equity in its capital structure, what is the firm's WACC? Assuming it must issue new stock to finance its capital budget.
7.26%
7.86%
7.64%
8.44%
8.14%
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