The target capital structure consists

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Sorensen System's Inc. is expected to pay a $2.50 dividend at year end (D1=$2.50), the dividend is expected to grow at a constant rate of 5.50% each year, and the common stock currently sells for $52.50 a share. 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 use if from retained earnings?

If the firm raises new common equity, how much higher will Angell Inc.’s WACC be?

Reference no: EM131354717

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