Compute the weighted average cost of capital

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The HWS company was recently formed to manufacture a new product. With the following capital structure: 9% debentures of 2002 ($1000 Par) $6,000,000 7% Preferred stock ($100 Par) $2,000,000 Common Stock (320,000 shs.) $8,000,000 total $16,000,000 The Company is expected to pay a $2 dividend next year. The dividend growth rate is 10%, the require rate of return on equity funds is 12%, and their common stock is presently selling for $50 per share. Assume a marginal tax rate of 40%. a) Compute the weighted average cost of capital.

Reference no: EM13944429

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