pany can issue bonds at a yield to maturity of 7.5 percent. · The cost of preferred stock is 7 percent. · The company's common stock currently sells for $34 a share. · The company's dividend has just paid $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 5 percent per year. · Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued. · The company's tax rate is 30 percent. What is the company's weighted average cost of capital (WACC)? Express your answer
pany can issue bonds at a yield to maturity of 7.5 percent. · The cost of preferred stock is 7 percent. · The company's common stock currently sells for $34 a share. · The company's dividend has just paid $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 5 percent per year. · Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued. · The company's tax rate is 30 percent. What is the company's weighted average cost of capital (WACC)? Express your answer
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Johnson Industries has a target capital structure that consists of 40 percent debt, 10 percent preferred stock, and 50 percent common stock.
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The company can issue bonds at a yield to maturity of 7.5 percent.
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The cost of preferred stock is 7 percent.
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The company's common stock currently sells for $34 a share.
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The company's dividend has just paid $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 5 percent per year.
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Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued.
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The company's tax rate is 30 percent.
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What is the company's weighted average cost of capital (WACC)? Express your answer in percentage (without the % sign) and round it to two decimal places.
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