Calculate the company’s WACC AND use the dividend discount model, business and finance homework help
Calculate the company’s WACC AND use the dividend discount model, business and finance homework help.
Business Situation: A company has a targeted capital structure of 40% long-term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50 per share and next year’s dividend is $2.50 per share that is growing by 4% per year. Question: Calculate this company’s weighted average cost of capital (WACC) AND use the dividend discount model. Show your calculations. Note: Please be aware that the answer must be derived by using the dividend discount model.
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