Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was$1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for$28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 4 percent flotation cost will be incurred. Net income in the coming year is projected to be$790,000, and the dividend payout ratio is 8 percent. Calculate WACC2. A. 14.11 percent B. 15.53 percent C. 14.57 percent D. 14.26 percent E. 14.75 percent
Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was$1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for$28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 4 percent flotation cost will be incurred. Net income in the coming year is projected to be$790,000, and the dividend payout ratio is 8 percent. Calculate WACC2. A. 14.11 percent B. 15.53 percent C. 14.57 percent D. 14.26 percent E. 14.75 percent
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was$1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for$28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 4 percent flotation cost will be incurred. Net income in the coming year is projected to be$790,000, and the dividend payout ratio is 8 percent. Calculate WACC2.
A. 14.11 percent
B. 15.53 percent
C. 14.57 percent
D. 14.26 percent
E. 14.75 percent
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