Report how you would advise the company of their condition

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Reference no: EM131808139

You have the following information about a company: Targeted capital structure of 40% long term debt and 60% common stock.

The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50.00 per share and next year's dividend is $2.50 per share that is growing by 4% per year. I need to calculate the company's weighted average cost of capital.

using the dividend discount model. And show my calculations. I also need to know if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC.

Explain and defend why I would agree or disagree. and Report how I would advise the company of their condition.

Reference no: EM131808139

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