Hook Industries’s capital structure consistssolely of debt and common equity. It can issue debt at rd =11%, and its commonstock currently pays a $2.00 dividend per share (D0 = $2.00). The stock’s price is currently$24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is35%, and its WACC is 13.95%. What percentage of the company’s capital structure consistsof debt?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
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Chapter13: Capital Structure Concepts
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Hook Industries’s capital structure consists
solely of debt and common equity. It can issue debt at rd =11%, and its common
stock currently pays a $2.00 dividend per share (D0 = $2.00). The stock’s price is currently
$24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is
35%, and its WACC is 13.95%. What percentage of the company’s capital structure consists
of debt?

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