Calculate the company weighted average cost of capital

Reference no: EM132078654

Question: Scenario: Wilson Corporation (not real) 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.

Prepare a minimum 700-word analysis with references including the following:

Calculate the company's weighted average cost of capital. Use the dividend discount model. Show calculations in Microsoft® Word.

The company's CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC. Explain and defend why you agree or disagree. Report how would you advise the CEO.

Format your paper consistent with APA guidelines

Reference no: EM132078654

Questions Cloud

Distinguish between inductive and deductive reasoning : Distinguish between inductive and deductive reasoning as they relate to efficacy of business theories.

Efficient production to keep the business profitable : In the 20th century, West focused on goals, cost, quality, and efficient production to keep the business profitable.

Develop an income statement and cash flow statement : Your team has been hired to provide financial analysis for a start-up company, Bobble in Style, which produces customized bobble heads.

Computer support services for innovations : Orally contracts with UGA Construction Company to provide computer support services for innovations UGA wishes to institute.

Calculate the company weighted average cost of capital : Wilson Corporation (not real) has a targeted capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate.

Selected organization is using effective strategies : Do you feel that your selected organization is using effective strategies?

Difference between employee and entrepreneur : What is the difference between an employee and an entrepreneur? What are the advantages of being an entrepreneur?

Construct the company market value balance sheet : Hightower, Inc. plans to announce it will issue $2.0 million of perpetual debt and use the proceeds to repurchase common stock.

Revolves around ethics and ethical decision making : Select a relevant and topical leadership issue from current news media that revolves around ethics and ethical decision making.

User Account

All Pages