Akron Corporation maintain a capital structure weight for long term debt of 36.71% and has a tax rate of 21%. The before tax cost of debt id 8.9%. There are 18,000shares of stock outstanding with beta of 1.42and a market price of $23 a share. The current market risk premium is 7.8% and the current risk free rate is 3.1%. This year, the firm paid an annual dividend of $1.68 a share and expects to increase that amount by 2% each year. Using an average expected cost of equity, What is the WACC?

2. Akron corporation currently sells 9820 motor homes per year at $45500 each, and 3680 luxury motor coaches per tear at $89700 each. The company wants to introduce a new portable camper to fill out ots product line. It hopes to sell, 4000 of these campers per year at $14750 each. An independent consultant has determined that if the new campers are introduced, sales of its existing motor homes will most likely increase by 250units per year while the sales of its motor coaches will probably decline by 368units per year. What is the amount that should be used as the annual sales figure when evaluating the portable camper project?

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC for Akron Corporation we need to calculate the cost of debt and the cost of equity and then det... View the full answer