Question: Johnny Cake Ltd has ten million shares of stock outstanding
Johnny Cake Ltd. has ten million shares of stock outstanding selling at $23 per share and an issue of $50 million in 9 percent, annual coupon bonds with a maturity of 17 years, selling at 93.5 percent of par. If Johnny Cake’s weighted average tax rate is 34 percent, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 6 percent per year, indefinitely, what is its WACC?
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