an analyst has collected the following information regarding Christopher Co: the

Question

an analyst has collected the following information regarding Christopher Co:

the company's capital structure is 70% and 30% debt, YTM on company's bond is 9%, company's year end dividend is forecasted to be $.80 a share, the company expects a constant dividend growth rate of 9% a year, the company's stock price is $25, tax rate is 40%, the company anticipates that it will need to raise new common stock this year and flotation costs will equal 10% of the amount issued. Assume the company accounts for flotation costs by adjusting the cost of capital. Given this information, calculate the company's WACC.

Explanation / Answer

Kd= 9%

wt= 30%

tax= 40%

Ke= 12.56%

wt of equity= 70%

WACC= [9x.3x(1-.4)]+[12.56x.7]= 10.412%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.