What is the company tax rate

Reference no: EM131979697

Question: Heavy Metal Corp. is a steel manufacturer that finances its operations with 40% debt, 10% preferred stock, and 50% equity. The interest rate on the company's debt is 11%. The preferred stock pays an annual dividend of $2 and sells for $20 a share. The company's common stock trades at $30 a share, and its current dividend (D0) of $2 a share is expected to grow at a constant rate of 8% per year. The flotation cost of external equity is 15% of the dollar amount issued, while the flotation cost on preferred stock is 10%. The company estimates that its WACC is 12.30%. Assume that the firm will not have enough retained earnings to fund the equity portion of its capital budget. What is the company's tax rate?

Reference no: EM131979697

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