About the company capital structure

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Reference no: EM13915000

Biogenetics Corporation has a target capital structure of 55 percent equity. The firm just paid dividends of $1.5 per share and dividends are expected to growth at 10 percent a year. Biogenetics YTM bonds are 7.5 percent, and the company is now on the 35 percent tax rate. On last trading day, Biogenetics stock was selling at $30.

a. What is Biogenetics WACC? Show Calculation

b. The company president has approached you about the company capital structure. He wants to know why the company doesn’t use more stock financing, since it costs less than debt. What would you tell the president?

Reference no: EM13915000

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