Harbuck's Coffee is trying to estimate its weighted average cost of capital. The market value of...

    

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Harbuck's Coffee is trying to estimate its weighted average cost of capital. The market value of Harbuck's debt and common stock is 25 million and 75 million respectively. The current 10-year T-bond rate is 2% and the required market return is 10%. Harbuck's Coffee's common stock has a beta of 1.2 and its current market price is $70 with a current dividend of $2 per share with an expected constant growth rate of 9% Harbuck's Coffee would incur flotation costs of 10% of their current market price if they were to sell new common stock. Harbuck's marginal tax rate is 25% and any new debt raised would have an interest rate of 7% Assume Harbuck's Coffee will have to sell new common stock to finance potential new projects. What is Harbuck's WACC using the DCF approach for the cost of new common stock? Harbuck's Coffee is trying to estimate its weighted average cost of capital. The market value of Harbuck's debt and common stock is 25 million and 75 million respectively. The current 10-year T-bond rate is 2% and the required market return is 10%. Harbuck's Coffee's common stock has a beta of 1.2 and its current market price is $70 with a current dividend of $2 per share with an expected constant growth rate of 9% Harbuck's Coffee would incur flotation costs of 10% of their current market price if they were to sell new common stock. Harbuck's marginal tax rate is 25% and any new debt raised would have an interest rate of 7% Assume Harbuck's Coffee will have to sell new common stock to finance potential new projects. What is Harbuck's WACC using the DCF approach for the cost of new common stock?

Answer rating: 100% (QA)

To calculate Harbucks Coffees weighted average cost of capital WACC using the discounted cash flow DCF approach for the cost of new common stock we ne... View the full answer