Equity used is from retained earnings

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Reference no: EM13804397

Quinlan Enterprises stock trades for $52.50 per share. It is expected to pay a $2.50 dividend at year end (D₁ = $2.50), and the dividend is expected to grow at a constant rate of 5.50% a year. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company’s WACC if all the equity used is from retained earnings?

a. 7.07%

b. 7.36%

c. 7.67%

d. 7.98%

e. 8.29%

Reference no: EM13804397

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