WACC based on Debt Equity and Tax Rate
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Question
Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a constant rate of 5% indefinitely. Today’s market price/share is $45. Suppose also that your company has some bonds outstanding in the market selling for $1,035. The bonds have 8 years left to maturity, with 8% coupon rate that pay a semi-annually. If your company’s capital structure is 35% debt and 65% equity, with the tax rate of 40% what is the WACC?
Summary
This question belongs to finance and discusses about calculating WACC based on debt, equity and tax rate.
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