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Based upon a review of GEs financial statements and selecting a few key datapoints, the following represents a summary of pertinent information on capital structure:

Long-term debt For our purposes, there are two issues of long-term debt outstanding with the following information provided:

Issue Time to Maturity	Coupon Rate	Current Quoted Price	Book Value of Issue
7 years	5.05%	$1,118.93	$35.0 B
15 years	4.00%	$1,052.18	$31.4 B

The bonds are semi-annual payment bonds and have equal seniority.

Preferred stock The company has 6 million shares of preferred stock outstanding that currently sell for $1,485 per share and pay an annual dividend of $77 per share. Dividends are current and the shares are non-cumulative.

Common stock The company has 8.738 billion shares of common outstanding currently selling for $6.26 per share. The following is a recent dividend history found in Value Lines report for the company.

Year	Annual Dividend	Year	Annual Dividend
2011	$0.61	2016	$0.92
2012	0.70	2017	0.84
2013	0.79	2018	0.37
2014	0.89	2019	0.04
2015	0.92	2020	0.04

While, given current circumstances, you might find this hard to believe, management is absolutely convinced that the dividend payments will revert to growth within the next year and management believes the 2011 17 period is a believable growth rate from the current levels when the business stabilizes.

Assume that you have consulted data services and uncovered that the current beta for GE is 0.90 and that the R_FREEfor the last fifty years has been 4.58% (using Treasury bonds) and the r_MARKET has been 10.51% for the same period.

Analysts expect the company to experience a marginal tax rate of 22% for the forecasting period.

Given the information above and your understanding of how to construct WACC rates, your job is to take the above data and fashion an appropriate WACC for decisions to be made over the next planning period. There are several decisions that must be made as you develop your WACC, so it is as important to explain the rationale for the assumptions you make as to display your conclusion. Thus, a brief memo outlining your assumptions and logic as well as a supporting Excel spreadsheet respond to this problem. Note there are multiple acceptable answers here, but all must be supported by solid rationale developed from the course principles and concepts.

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