Assume that you are on the financial staff of Vanderheiden Inc. ,and you have collected the following data: The yield on the company's outstanding bonds is 7.75%,its tax rate is 25%,the next expected dividend is $0.65 a share,the dividend is expected to grow at a constant rate of 6.00% a year,the price of the stock is $14.00 per share,the flotation cost for selling new shares is F = 10%,and the target capital structure is 45% debt and 55% common equity.What is the firm's WACC,assuming it must issue new stock to finance its capital budget?

Question

Quizplus · Accepted Answer

The Answer of Assume that you are on the financial staff of Vanderheiden Inc. ,and you have collected the following data: The yield on the company's outstanding bonds is 7.75%,its tax rate is 25%,the next expected dividend is $0.65 a share,the dividend is expected to grow at a constant rate of 6.00% a year,the price of the stock is $14.00 per share,the flotation cost for selling new shares is F = 10%,and the target capital structure is 45% debt and 55% common equity.What is the firm's WACC,assuming it must issue new stock to finance its capital budget?

Assume That You Are on the Financial Staff of Vanderheiden