Given for a firm:

LT debt          7000000

preferred stock (100000 shares) 1000000

common stock (200000 shares)  7000000

The firm's bonds are currently selling at 80%par, generating a current market yield of 9%, and the corp. has 40% tax rate. The preferred stock is selling at its par value and pays a 6% dividend. The common stock has current market value of $40 and is expected to pay a $1.20 per share dividend this year. Dividend growth is expected to be 10% per year, and flotation costs are negligible. The firm's WACC is_

Ans is : 9.6%.

Plz. write the calculation.

Given for a firm:

LT debt          7000000

preferred stock (100000 shares) 1000000

common stock (200000 shares)  7000000

The firm's bonds are currently selling at 80%par, generating a current market yield of 9%, and the corp. has 40% tax rate. The preferred stock is selling at its par value and pays a 6% dividend. The common stock has current market value of $40 and is expected to pay a $1.20 per share dividend this year. Dividend growth is expected to be 10% per year, and flotation costs are negligible. The firm's WACC is

5.4*7/15 + 6*1/15+ 13*7/15 =2.52+0.4+6.06 =8.98