ABC's capital structure is comprised of 25% bonds with a 5% cost, 20% preferred stock with a $5 dividend, 30% common stock, 25% retained earnings. Dividends on common stock are $4 and are expected to grow at a constant rate of 5%. The market price per common share is $30, and preferred shares are selling for $50. The placement cost of new issuances of common shares is 10%. The bonds are sold at the same par value, their term is 10 years. The tax rate is 35%. Determine the weighted average cost of capital?

Answer rating: 100% (QA)

To determine the weighted average cost of capital WACC for ABC we need to calculate the cost of each ... View the full answer