Am. 157. Sorensen Systems Inc. is expected to pay a $2.50dividend at year end (D1 = $2.50), the dividend isexpected to grow at a constant rate of 5.50% a year,and the common stock currently sells for $37.50 ashare. The before - tax cost of debt is 7.50%, and thetax rate is 40%. The target capital structure consists of45% debt and 55% common equity. What is thecompany's WACC if all the equity used is from retainedearnings? Do not round your intermediate calculations.Question 40 options:9.41 % 8.72% 7.58% 9.94% 8.80%

Option b: This option is correct. Step 1:We have to calculate the cost of equity using the dividend…

Answered: Sorensen Systems Inc. is expected to…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 11P

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