A financial analyst wants to compute a company's weighted average cost of capital (WACC) using the dividend discount model. The company has a before-tax cost of new debt of 9%, tax rate of 37.5%, target debt-to-equity ratio of 0.76, current stock price of $74, estimated dividend growth rate of 7% and will pay a dividend of $3.2 next year. What is the company’s WACC A. 8 percent. B. 9 percent. C. 10 percent. D. 11 percent.

A financial analyst wants to compute a company's weighted average cost of capital (WACC) using the dividend discount model. The company has a before-tax cost of new debt of 9%, tax rate of 37.5%, target debt-to-equity ratio of 0.76, current stock price of $74, estimated dividend growth rate of 7% and will pay a dividend of $3.2 next year. What is the company’s WACC A. 8 percent. B. 9 percent. C. 10 percent. D. 11 percent.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 1hM

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