Illustrate what is the weighted average cost of capital

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Q. Granite Works maintains a debt-equity ratio of 0.65 and has a tax rate of 32 percent. The industry does not issue preferred stock. The pre-tax cost of debt is 9.8 percent. There are 25,000 shares of stock outstanding with a beta of 1.2 and a market price of $19 a share. The current market risk premium is 8.5 percent and the current risk-free rate is 3.6 percent. This year, the industry paid an annual dividend of $1.10 a share and expects to increase which amount by 2 percent each year. Using an average expected cost of equity; illustrate what is the weighted average cost of capital?

Reference no: EM1385359

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