Compute the company wacc

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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

% of Future Financing

Bonds (8%, $1k par, 16 year maturity) 36%

Common equity 45%

Preferred stock (5k shares outstanding, $50 par, $1.50 dividend) 19%

Total % 100%

Compute the company's WACC.

Reference no: EM132408139

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