Sorensen Systems Inc. is expected to pay a dividend of $2.80 at year end (Dj). t

Question

Sorensen Systems Inc. is expected to pay a dividend of $2.80 at year end (Dj). the dividend is expected to grow at a constant rate of 5.50% a year and the common stock currently sells for $37.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital e consists of 45% debt and 55% common equity What is the company's WACC if all the equity used is from retained earnings? Your answer should be between 7.36 and 12.57, rounded to 2 decimal places, with no special characters oo is sharing your screen

Explanation / Answer

cost of equity=(2.80/37.50)+5.50%=12.97%

WACC=55%*12.97%+45%*7.50%*(1-40%)

=9.16%

the above is answer based on data

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