Johnson industries finances its projects with 40 debt 10, Ask an Expert

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Johnson Industries finances its projects with 40% debt, 10% preferred stock, and 50% common stock.

They issue bonds @yield to maturity of 8.4%.

Preferred Stock cost = 9%

Common stock price Po = $30 per share

Company's dividend is currently $2.00 a share (Div0 = $2.00), and is expected to grow at 6%.

Assume that the floatation cost on debt and preferred stock is zero, and no new stock will be issued.

Tax rate = 30%

Using the constant growth rate model, What is a.) cost of capital and b.) what is the company's WACC?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92800644

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