Welltodo Ltd has the following capital structure, which it considers to be optimal: debt =
15%,
investors expect earnings and dividends to grow at a constant rate of 6% in the future.
Welltodo paid a dividend of Gh₵4.70 per share last year (D0), and its stock currently sells
at a price of Gh₵60 per share. Ten-year Treasury bonds yield 6%, the market risk premium
is 5%, and Welltodo’s beta is 1.3. The following terms would apply to new security
offerings. Preferred: New preferred could be sold to the public at a price of Gh₵100 per
share, with a dividend of Gh₵9. Flotation costs of Gh₵5 per share would be incurred.
Debt: Debt could be sold at an interest rate of 9%. Common: New common equity will be
raised only by
Determine the company’s WACC
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