Find the company weighted average cost of capital

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A company that we are evaluating has the following capital structure: Debt: 35% Equity: 65% The company has earnings after tax of $5,310,000 and is paying out dividends of $1,600,000. They have to finance a new project which will require that they take out debt of $2,000,000 at a 10% rate. This is the same interest rate that they pay on the $15,000,000 of existing debt that they have. The company currently has 1,000,000 shares outstanding with a current market price per share of $31. The company's long-term growth rate of dividends is expected to be 8%. Assuming a 40% tax rate, find the company's weighted average cost of capital (WACC).

Reference no: EM132169110

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