The CFO of Blue Co. has collected the following information related to the firm’s cost of capital to calculate its weighted average cost of capital: · The long-term bonds currently offer a yield to maturity of 8%. · The corporate tax rate applicable to Blue co. is 40%. · The company recently paid a dividend of P2 a share. · Current stock price is P32 per share. · The constant dividend growth rate of 6% each year. · The company pays a 10% flotation cost for each issuance of new common stock · The Blue Co. has a target capital structure of 75% equity funded and 25% debt funded. · The firm will be able to use retained earnings to fund the equity portion of its capital budget. What is the Blue Co.’s WACC? a. 10.67% b. 11.22% c. 11.37% d. 10.22%
The CFO of Blue Co. has collected the following information related to the firm’s cost of capital to calculate its weighted average cost of capital:
· The long-term bonds currently offer a yield to maturity of 8%.
· The corporate tax rate applicable to Blue co. is 40%.
· The company recently paid a dividend of P2 a share.
· Current stock price is P32 per share.
· The constant
· The company pays a 10% flotation cost for each issuance of new common stock
· The Blue Co. has a target capital structure of 75% equity funded and 25% debt funded.
· The firm will be able to use
What is the Blue Co.’s WACC?
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