Company weighted average cost of capital

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Reference no: EM131972751

Assume that a firm has 125,000 shares of outstanding stock at a price of $22 per share. The stock is expected to pay a dividend of $1.40 next year, with a growth rate of 4%. It also has 1,350 outstanding bonds at a par value of $1,000 each and a yield of 4.5%. The company pays a tax rate of 30%. What is the company’s weighted average cost of capital (WACC)? (Note: assume that the bonds are trading at par value of $1,000 and use the dividend discount model to solve for the required rate of return of equity.)

Reference no: EM131972751

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