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

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Finance

Johnson Industries finances its projects with 40 percent debt,10 percent preferred stock, and 50 percent common stock.
·
The company can issue bonds at a yield to maturity of 7.4percent.
·
The cost of preferred stock is 9 percent.
·
The company's common stock currently sells for $32 a share.
·
The company's dividend has just paid $2.00 a share(D₀ = $2.00), and is expected to grow at a constant rateof 7 percent per year.
·
Assume that the flotation cost on debt and preferred stock iszero, and no new stock will be issued.
·
The company's tax rate is 30 percent.

What is the company's weighted average cost of capital (WACC)?Express your answer in percentage (without the % sign) and round itto two decimal places.

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3.9 Ratings (695 Votes)

Information providedYield to maturity 74Cost of preferred stock 9Current stock price 32Current stock dividend 2Dividend growth rate 7Tax rate 30The cost of common See Answer

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Johnson Industries finances its projects with 40 percent debt,10 percent preferred stock, and 50 percent common stock.·The company can issue bonds at a yield to maturity of 7.4percent.·The cost of preferred stock is 9 percent.·The company's common stock currently sells for $32 a share.·The company's dividend has just paid $2.00 a share(D0 = $2.00), and is expected to grow at a constant rateof 7 percent per year.·Assume that the flotation cost on debt and preferred stock iszero, and no new stock will be issued.·The company's tax rate is 30 percent.What is the company's weighted average cost of capital (WACC)?Express your answer in percentage (without the % sign) and round itto two decimal places.

·	The company can issue bonds at a yield to maturity of 7.4percent.
·	The cost of preferred stock is 9 percent.
·	The company's common stock currently sells for $32 a share.
·	The company's dividend has just paid $2.00 a share(D₀ = $2.00), and is expected to grow at a constant rateof 7 percent per year.
·	Assume that the flotation cost on debt and preferred stock iszero, and no new stock will be issued.
·	The company's tax rate is 30 percent.