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Company weighted average cost of capital-dobson dairies

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Dobson Dairies has a capital structure which consists of 60 percent long-term debt and 40 percent common stock. The company's CFO has obtained the following information:

• The before-tax yield to maturity on the company's bonds is 9 percent.

• The company's common stock is expected to pay a $3.00 dividend at year end (D1 = $3.00), and the dividend is expected to grow at a constant rate of 7 percent a year. The common stock currently sells for $60 a share.

• Assume the firm will be able to use retained earnings to fund the equity portion of its capital budget.

• The company's tax rate is 40 percent. What is the company's weighted average cost of capital (WACC)?

Reference no: EM132444309

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