Question: . Rosin Systems Inc. is expected to pay a $2.50 dividend at year end (D 1 = $2.80), the dividend is expected to grow at

. Rosin Systems Inc. is expected to pay a $2.50 dividend at year end (D₁ = $2.80), the dividend is expected to grow at a constant rate of 6% a year, and the common stock currently sells for $50 a share. The before-tax cost of debt is 8%, and the tax rate is 40%. The target capital structure consists of 30% debt and 70% common equity. What is the companys WACC if all the equity used is from retained earnings? Show work.

a. 8.26% b. 7.16% c. 9.67% d. 8.98%

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