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Watta company has only common equity and bonds. You are asked to estimate Watta Company's WACC and you have the following information: Watta's last stock dividend was $1.20 per share. Its dividend is expected to grow at 8% indefinitely. The stock currently sells for $50 per share. Watta has a target debt-equity ratio of 0.40/0.60 and it can sell 9% 10-year coupon bonds at par value. The average gong market interest rate for other companies' debts currently is 10%. If the tax rate is 35%, what is the WACC? (The company does not have any preferred stocks).

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92773355

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