Gladbach Company has a capital structure, which consists of 60 percent long-term debt and 40...
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Finance
Gladbach Company has a capital structure, which consists of 60 percent long-term debt and 40 percent common stock. The companys CFO has obtained the following information:
- The companys bonds are selling for $1035 per bond with coupon rate of 8% and maturity value of $1,000. The bond will be matured in 21 years.
- The companys common stock is expected to pay a $3.00 dividend at year end, and the dividend is expected to grow at a constant rate of 6.5 percent a year. The common stock currently sells for $56 a share.
- Assume the firm will be able to use retained earnings to fund the equity portion of its capital budget.
- The companys tax rate is 40 percent.
What is the companys weighted average cost of capital (WACC)?
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