If the firm raises new common equity

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Reference no: EM131354795

Sorensen System's Inc. is expected to pay a $2.50 dividend at year end (D1=$2.50), the dividend is expected to grow at a constant rate of 5.50% each year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50% and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity.

The firms WACC is therefore 7.67%

If the firm raises new common equity, how much higher will Sorensen System's Inc.'s WACC be?

Reference no: EM131354795

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