NCC Corporation is considering building a new facility in Texas. To raise money for the capital projects, the corporation plans the following capital structure: 40% of money will come from issuing bonds, and 60% will come from Retained Earnings or new common stock. The corporation does not currently have preferred stock. NCC Corporation will issue bonds with an interest rate of 9%, up to $30 million dollars in bonds. After issuing $30 million in bonds, the interest cost will rise to 12.5%. The next dividend on common stock is expected to be $2.00 per share. The stock price is $16.00 per share, and is expected to grow at 3% per year. The flotation cost for issuing new common stock is estimated at 12%. NCC Corporation has $66 million in retained earnings that can be used. The tax rate for NCC Corporation is 35%. What is the initial weighted average cost of capital (WACC) for NCC Corporation? 11.90% 11.77% 12.9% 15.3% 11.64%
NCC Corporation is considering building a new facility in Texas. To raise money for the capital projects, the corporation plans the following capital structure: 40% of money will come from issuing bonds, and 60% will come from
What is the initial weighted average cost of capital (WACC) for NCC Corporation?
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11.90% |
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11.77% |
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12.9% |
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15.3% |
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11.64% |
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