The outstanding debt instrument (bonds) yield is estimated at 7.75%; the applicable tax rate is 40%; the company is expected to have its next (expected) dividend is $0.65 a share; the dividend growth rate is expected to be at a constant rate of 6.00% a year. The current the stock price is $15.00 per share; the flotation cost for selling new shares is estimated at F = 10%; The target capital structure is 45% debt and 55% common equity.

What is the firm's cost equity including flotation cost?

What is the firm's WACC, assuming it must issue new stock to finance its capital budget?

Answer rating: 100% (QA)

To calculate the firms cost of equity including flotation cost we can use the f... View the full answer