Corporate income tax rate-dividend to grow at constant rate

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Reference no: EM13976663

Refer to Lancaster Engineering Inc. (LEI) information below, what is LEI’s weighted average cost of capital (WACC)? (Note: Keep your answer. There are two other related questions.)

Use the following information for the three questions referring to Lancaster Engineering Inc. (LEI):

Lancaster Engineering Inc. (LEI) has the following capital structure:

Debt 25%

Preferred stock 15%

Common Equity 60%

LEI’s corporate income tax rate is 40%. Investors expect LEI’s dividend to grow at a constant rate of 9% in the future. LEI has just paid a dividend of $3.60 per share (D0), and its common stock currently sells at a price of $54 per share. LEI can issue new preferred stock, with annual dividend of $11, at a price of $95 per share. LEI can also issue new corporate bond with yield to maturity, 12%.

Reference no: EM13976663

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