What is the wacc for bergen express

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Problem 1: Bergen Express has a target capital structure of 45% debt, 45% equity and 10% preferred stock. The firm's before-tax cost of debt is 5%. The preferred stock pays a $2.00 annual dividend with a par value of $25, a market price of $28 and floatation costs of $1.00 per share. The firm will raise common equity through retained earnings. The common stock dividend to be paid in one year is $1.40. The equity beta for the firm is 0.94. The expected rate of return on the market is 13 percent. The risk-free rate is 4 percent and the tax rate is 25%. What is the WACC?

Reference no: EM132746258

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