Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was$1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for$28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 4 percent flotation cost will be incurred. Net income in the coming year is projected to be$790,000, and the dividend payout ratio is 8 percent. Calculate WACC2. A. 14.11 percent B. 15.53 percent C. 14.57 percent D. 14.26 percent E. 14.75 percent
Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was$1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for$28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 4 percent flotation cost will be incurred. Net income in the coming year is projected to be$790,000, and the dividend payout ratio is 8 percent. Calculate WACC2. A. 14.11 percent B. 15.53 percent C. 14.57 percent D. 14.26 percent E. 14.75 percent
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter17: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 3P
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Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was$1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for$28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 4 percent flotation cost will be incurred. Net income in the coming year is projected to be$790,000, and the dividend payout ratio is 8 percent. Calculate WACC2.
A. 14.11 percent
B. 15.53 percent
C. 14.57 percent
D. 14.26 percent
E. 14.75 percent
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