Calculate weighted cost of capital for project

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ABC is planning a $200 million project, to be partly financed by issuing bonds with a coupon rate of 8%, 10 year maturity, a $1,000 face value, and a 2% flotation cost. ABC's common stock sells for $15 per share, pays a dividend of $1.50 a share and the dividend is expected to grow at 6% a year forever. ABC expects to have $60 million in retained earnings for this project. ABC has a target capital structure of 25% and 75% common equity. Calculate its weighted cost of capital for this project. Use a 40% tax rate.

Reference no: EM132664475

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