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What is weighted cost of capital for coming year for alpha

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Reference no: EM132940718

Problem 1: Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to $1.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year?

Reference no: EM132940718

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