Company x is considering changing its capital structure in

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Company X is considering changing its capital structure, in light of the tough business environment. Currently, Company X’s total capital consists of:

  • $950 million in debt
  • $20 million in leased assets
  • $500 million of preferred stock
  • $900 million in common stock
  • $750 million in retained earnings


The debt coupon is 8% and tax rate is 40% while the current preferred share price is $96.20 and the dividends per share is $9. The company's common stock is trading at $25.50, it's dividend payout this year is $1.15 the growth rate of the dividend is 8.5%.
b. If Company X wants to change its capital structure (i.e., lower their WACC), what should it do?

Reference no: EM13391127

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