Component of capital to find their respective weights

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Starr Company's balance sheet includes $54 million of long-term debt and total common equity of $91 million with 22 million shares of common stock outstanding. The debt has 12 years to maturity, a coupon rate of 6% with annual compounding, and a yield to maturity of 5%. The company expects to pay a dividend on the common stock at the end of the year (D1) of $2.77 per share with future dividends growing at 2% per year. The common stock is valued at $34 per share and the firm's tax rate is 22%. What would the WACC be (in percentage terms, rounded to two decimal places, e.g., 12.34) for this company using the market values of debt and equity? Note: You will need to first estimate the market values of each component of capital to find their respective weights as well as their respective costs before making the WACC calculation.

Reference no: EM133557944

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