Issue new stock to finance capital budget

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Reference no: EM131949730

You have collected the following data. The yield on the companys outstanding bonds is 7%, its tax rate is 35%, the next expected dividend is $1.20 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $25.00 per share, the floatation cost for selling new shares is f= 10%, and the target capital structure is 40% debt and 60% common equity. What is the firms WACC, assuming it must issue new stock to finance its capital budget?

Reference no: EM131949730

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