Issue new stock to finance its capital budget

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Assume that you are on the financial staff of Vander Inc., and you have collected the following data: The yield on the company’s outstanding bonds is 6.50%, its tax rate is 40%, the next expected dividend is $1.10 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $30.00 per share, the flotation cost for selling new shares is F = 15%, and the target capital structure is 35% debt and 65% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget? Show work.

Reference no: EM131947120

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