Vandelay Industries has a target capital structure consisting of 30% debt, 10% preferred stock, and 60% common equity. Vandelay has 20-year, 12% semiannual coupon bonds that sell at their par value of $1,000. The component cost of preferred stock is 12.6%. Vandelay is a constant growth firm with plans to pay a dividend of $2.10, sells for $27.00 per share, and has a growth rate of 8%. Flotation costs on new common stock are 10%, and the firm's marginal tax rate is 25%. What is Vandelay Industries’ WACC assuming they will have to use external equity?

Answer rating: 100% (QA)

To calculate Vandelay Industries Weighted Average Cost of Capital WACC we need to determine the cost ... View the full answer