Back to Assignment Attempts: Keep the Highest: /1 6. Problem 10.11 WACC AND PERC

Question

Back to Assignment Attempts: Keep the Highest: /1 6. Problem 10.11 WACC AND PERCENTAGE OF DEBT FINANCING Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at ra 8%, and its common stock currently pays a $2.50 dividend per share (Do = $2.50). The stock's price is currently $22.25, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 35%, and its WACC is 15.25%, what percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. Grade It Now Save & Continue Continue without saving

Explanation / Answer

cost of equity = 2.50*1.08/22.25 + 8% = 20.1348%

w*8%*0.65 + (1-w)*20.1348 = 15.25%

weight of debt = 32.49%

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