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Compute the Zaboka Company WACC

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Reference no: EM132971260

Question - Compute the Zaboka's Company WACC from following information. What is the company's WACC?

The Zaboka Company sells bonds on the OTC. It has issued 3000 15-years bonds three years ago. The bonds' currently trade at $1199.00 with a coupon rate of 8.5%. Due to the recent tax reform, the company's tax bracket drops from 35% to 21%.

The company expects to have $125,000.00 retained earnings. The company's earnings are expected to grow from $2.5 to $7.9 for the same time period (that is for the remaining years or time to maturity of the bonds). This growth rate is expected to remain constant. The latest dividend paid was $3.5 per share. Investors require 14% on any new issue. The company expects to issue 100,000 new shares.

Reference no: EM132971260

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