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The capital structure for Mills Corporation is shown below. Currently, flotation costs are 13% of market value for a new bond issue and $3 per share for preferred stock. The dividends for common stock were $2.50 last year and have an estimated annual growth rate of 6%. Market prices are $1,050 for bonds, $20 for preferred stock, and $40 for common stock. Assume a 34% tax rate.
Financing Type: Future Financing:
Bonds (8%, $1K, 16 year maturity) 36%
Common Equity 45%
Preferred stock (5k shares outstanding 19%
, $50 par , $1.50 dividend)
Total % 100%
Compute the companies WACC.
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Summarize two of the authors' arguments
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