Sigma Company has the following capital structure: 

35% debt, 20% preferred stock and 45% common stock.    

The firm's 12-year 8% annual coupon bonds is currently trading at $765.50      

The firm's 12% annual dividend perpetual preferred stock with a par value of $100 is trading at $68.50  

 Their common stock is trading at $60. Their next dividend is expected to be $4.25. The growth rate is forecasted at 10%.   

The risk-free rate is 8%, the beta of the stock is 1.3 and the market risk premium (Rm - Rf) is 12%.    

What is the new WACC if you take the average of the CAPM and dividend growth models to estimate the cost of equity. Assume a tax rate of 40%

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC using the average of the CAPM and dividend gr... View the full answer