Calculate the weighted average cost of capital

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Question - BD Corporation has 8,000,000 shares of common stock outstanding, 800,000 shares of preferred stock outstanding and 187,500 bonds outstanding. The common stock currently sells for $37.50 and just paid a dividend of $2.00 per share and is expected to grow at a constant rate of 10% and has a beta of 1.30. The preferred stock currently sells for $62.50 per share and pays a dividend of $4.00. The bonds have a coupon of 7%, compounding semi-annually, 15 years to maturity and sells for 80% of par. The expected return on the market is 13% and the risk-free rate is 5%. BD Corp. has a tax rate of 34%. Calculate the weighted average cost of capital (WACC).

a. 11.9076%

b. 12.8800%

c. 11.7676%

d. 12.0376%

Reference no: EM132786126

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