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  3. you were hired as a consultant to biggers corp., a

You were hired as a consultant to Biggers Corp., and you were provided with the...

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Finance

You were hired as a consultant to Biggers Corp., and you were provided with the following data: Target capital structure: 20% debt and 80% common equity. The yield to maturity for the company s debt is 6.0%. The company s common stock is trading at a price of $50.00. The company is expected to pay a dividend of $3.50 next year (D1), and this dividend is expected to grow at a constant rate of 4.0%. The tax rate is 40%. Suppose the firm has no retained earnings to invest but must instead issue new stock (You cannot use rs from the DCF model any more). The costs for issuing new common stock are 12.0% of capital raised. What is the firm s WACC given this new information (round to 1 decimal place)?

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