The equity used is from retained earnings

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Reference no: EM132039519

1. A stock has just paid $4 of dividend. The dividend is expected to grow at a constant rate of 8% per year, and the common stock currently sells for $54. The before tax cost of debt is 8%, and the tax rate is 20%. The target capital structure consists of 30% debt and 70% common equity. What is the companies WACC if all the equity used is from retained earnings?

A) 13.91%

B) 12.20%

C) 12.07%

D) 14.30%

E) 13.12%

2. Taxes paid on salvaged assets, tax rate x (salvage value - book value), ______ if the tax rate decreases.

A) Decreases

B) do not change

C) Increases

Reference no: EM132039519

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