Essex Corporation's target capital structure consists of 40% debt and 60% common equity. Assume that the firm has no retained earnings. The companys last dividend (D o) was $2.00, which is expected to grow at a constant rate of 5% and the current equilibrium stock price is $21.88. Essex can raise all the debt financing it needs at 14%. If Essex issues new common stock, a 20% flotation cost will be incurred. The firm tax rate is 40%. What is the WACC

Answer rating: 100% (QA)

Cost of equity needs to be determined in order to calculate WACC This ... View the full answer