Calculate the company WACC

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Reference no: EM131527661

An analyst has collected the following information regarding Christopher Co.:

The company’s capital structure is 50% common equity, 10% preferred equity and 40% debt.

The yield to maturity on the company’s bonds is 9 percent.

The company’s year-end dividend on common stock is forecasted to be $0.80 a share.

The company expects that its dividend will grow at a constant rate of 9 percent a year.

The company’s stock price is $25.

The company’s preferred stock is priced at $20 and has a dividend of $2.20 per share.

The company’s tax rate is 40 percent.

The company anticipates that it will need to raise new common stock and preferred stock this year. Its investment bankers anticipate that the total flotation cost will equal 5 percent of the amount issued. Assume the company accounts for flotation costs by adjusting the cost of capital. Given this information, calculate the company’s WACC.

Reference no: EM131527661

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