NCC Corporation is considering building a new facility in Texas. To raise money for the capital...

 

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NCC Corporation is considering building a new facility in Texas. To raise money for the capital projects, the corporation plans the following capital structure: 25% of money will come from issuing bonds, and 75% will come from Retained Earnings or new common stock. The corporation does not currently have preferred stock. NCC Corporation will issue bonds with an interest rate of 8%, up to $50 million dollars in bonds. After issuing $50 million in bonds, the interest cost will rise to 12.0%. The next dividend on common stock is expected to be $2.75 per share. The stock price is $26.00 per share, and is expected to grow at 4% per year. The flotation cost for issuing new common stock is estimated at 12%. NCC Corporation has $66 million in retained earnings that can be used. The tax rate for NCC Corporation is 32%. What is the WACC after the second breakpoint? NCC Corporation is considering building a new facility in Texas. To raise money for the capital projects, the corporation plans the following capital structure: 25% of money will come from issuing bonds, and 75% will come from Retained Earnings or new common stock. The corporation does not currently have preferred stock. NCC Corporation will issue bonds with an interest rate of 8%, up to $50 million dollars in bonds. After issuing $50 million in bonds, the interest cost will rise to 12.0%. The next dividend on common stock is expected to be $2.75 per share. The stock price is $26.00 per share, and is expected to grow at 4% per year. The flotation cost for issuing new common stock is estimated at 12%. NCC Corporation has $66 million in retained earnings that can be used. The tax rate for NCC Corporation is 32%. What is the WACC after the second breakpoint?

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC after the second breakpoint we need to first ... View the full answer