Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D₁- $2.50), the dividend is expected to grow at a constant rate of 5.50 % a year, and the common stock currently sells for $80.00 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings? O 7.31% O 6.84% O 6.70% O 6.77% O 5.75%

Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D₁- $2.50), the dividend is expected to grow at a constant rate of 5.50 % a year, and the common stock currently sells for $80.00 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings? O 7.31% O 6.84% O 6.70% O 6.77% O 5.75%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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