Calculate the companys weighted average cost

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Reference no: EM131982891 , Length: word count : 700

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 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.

Calculate the company's weighted average cost of capital.

Use the dividend discount model.

Shows calculations in Microsoft® Word.

Explain and defend why he/she agrees or disagrees with this statement:

The company's CEO has stated that if the company increases the amount of long term debt, so that the capital structure will be 60% debt and 40% equity, this will lower its WACC.

Reports what he/she would advise the CEO.

The analysis is 700 words in length.

Reference no: EM131982891

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