Compute the wacc for the financing scenario

Reference no: EM13243837

Tiffany Baking Co. wants to arrange for $50 million in capitalfor manufacturing a new consumer product. The currentfinancing plan is 60% equity capital and 40% debt financing. Compute the WACC for the following financing scenario: Equitycapital ($35 million) via common stock sales for 40% of thisamount that will pay dividends at a rate of 5% per year, and theremaining 60% from retained earnings, which currently earn 9% peryear. Debt capital ($15 million) obtained through twosources - bank loans for $10 million borrowed at 8% per year, andthe remainder in convertible bonds at an estimated 10% per year bond interest.

Reference no: EM13243837

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