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What is the company weighted average cost of capital

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Question - Hertha BSC Company has a capital structure, which consists of 60 percent long-term debt and 40 percent common stock. The company's CFO has obtained the following information:

1. The company's bonds are selling for $1000 per bond with coupon rate of 8% and maturity value of $1,000.The bond will be matured in 20 years.

2. The company's common stock is expected to pay a $3.00 dividend at year end, and the dividend is expected to grow at a constant rate of 7 percent a year. The common stock currently sells for $60 a share.

3. Assume the firm will be able to use retained earnings to fund the equity portion of its capital budget.

4. The company's tax rate is 40 percent.

Required - What is the company's weighted average cost of capital (WACC)?

Reference no: EM133170494

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