Company A has a capital structure: debt 25%, equity 60%, preference 15%. Its tax rate 40%, and earning (and dividends) are expected to grow at a constant 9%. Last years dividend was $3. 60 and the stock price is currently $54. the company is evaluating two options for more capital; 

(i) debt @12% 

(ii) preference stock paying a dividend of $11/share and with a price of $95/share. 

Find the cost of each capital component and the company's WACC.

Answer rating: 100% (QA)

In order to calculate the companys weighted average cost of capital WACC its essential first to comp... View the full answer