Marie Corp. has $1,860 in debt outstanding and $2,853 in common stock (and no preferred stock). Its marginal tax rate is 30%. Marie's bonds have a YTM of 6.3%. The current stock price (P0) is $46. Next year's dividend is expected to be $2.76, and it is expected to grow at a constant rate of 5% per year forever. The company's W.A.C.C. is ____%.

Marie Corp. has $1,860 in debt outstanding and $2,853 in common stock (and no preferred stock). Its marginal tax rate is 30%. Marie's bonds have a YTM of 6.3%. The current stock price (P0) is $46. Next year's dividend is expected to be $2.76, and it is expected to grow at a constant rate of 5% per year forever. The company's W.A.C.C. is ____%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

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Question

Marie Corp. has $1,860 in debt outstanding and $2,853 in common stock (and no preferred stock). Its marginal tax rate is 30%. Marie's bonds have a YTM of 6.3%. The current stock price (P₀) is $46. Next year's dividend is expected to be $2.76, and it is expected to grow at a constant rate of 5% per year forever. The company's W.A.C.C. is ____%.

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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