Capital budgeting purposes

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Reference no: EM13921583

Falcon Ridge Developers wants to compute the firm’s WACC for capital budgeting purposes. The firm uses 30% debt, 20% preferred stock and the remainder is in equity. The YTM on the firm’s debt is currently 4.5% and the firm’s marginal tax rate is 40%. They pay a dividend of $3 on their preferred stock and the current price of the preferred stock is $75. Falcon’s most recent common dividend was also $3, but has been growing at a rate of 8% per year and is expected to continue that trend. The common stock is currently selling for $50. Calculate the firm’s WACC.

Reference no: EM13921583

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