What is rollins weighted average cost of capital

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Rollins Corporation is examining its cost of capital. The company has two sources of long-term fund: long-term debt (bond) and common equity.

Debt information: Its bonds have a 5 percent coupon, paid annually, with a maturity of 16 years, and are currently selling for $1,089. Par value is $1,000. The corporate tax rate is 35%.

Equity information: Rollins' beta is 0.95, the risk-free rate is 4 percent, and the market rate of return is 8 percent. Rollins is a constant dividend growth firm which is expected to pay a dividend of $1.12, sells for $22.00 per share, and has a dividend growth rate of 3 percent

What is Rollins' weighted average cost of capital (WACC) given that the capital structure of Rollins's is 45% debt and 55% equity? (Use cost of equity from dividend growth model)

Reference no: EM132699365

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