Compute the company WACC

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Question - The Tenedero, Belleres and Ojilla aka TBO Company is planning to invest in a piece of drying equipment for their dried mango product line and needs to evaluate this using the discounted cash-flow techniques in capital budgeting, thus, they need to identify their weighted average cost of capital. The company plans to use P10Million of long-term debts, P5million of preferred stock and P15 million of common equity. Their long-term debt used to have a 15% interest rate but currently, the market requires as much as 17%. Their preferred stock is selling at P40 with P5 dividends. Their common equity is selling at P80 with 8% growth rate in dividends. Furthermore, they are planning to issue P6 dividend per stock at the end of the year. Both preferred stocks and common stocks have a flotation cost of 10%. Their income tax rate is 30%. Compute for the company's WACC?

Reference no: EM132937270

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