Compute the company WACC

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Point 1: The capital structure for Mills Corporation is shown below. Currently, flotation costs are 13% of market value for a new bond issue and $3 per share for preferred stock. The dividends for common stock were $2.50 last year and have an estimated annual growth rate of 6%. Market prices are $1,050 for bonds, $20 for preferred stock, and $40 for common stock. Assume a 34% tax rate.

 

Financing Type                                                                     % of Future Financing

Bonds (8%, $1k par, 16 year maturity)                                                36%

Common equity                                                                               45%

Preferred stock (5k shares outstanding, $50 par, $1.50 dividend)             19%

Total %                                                                                     100%

Question 1: Compute the company's WACC.

Reference no: EM132488357

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