Question

Easy Car Corp. is a grocery store located in the Southwest. It plans to pay an annual dividend of ​$4.00 next year to its shareholders and plans to increase the dividend annually at the rate of 2.0​%. It currently has 1,000,000 common shares outstanding. The shares currently sell for ​$16 each. Easy Car Corp. also has 30,000 semiannual bonds outstanding with a coupon rate of 7​%, a maturity of 28 ​years, and a par value of ​$1,000. The bonds currently have a yield to maturity​ (YTM) of 9%. What is the weighted average cost of capital (WACC) for Easy Car Corp. if the corporate tax rate is 30%?

When answering this problem enter your answer using percentage notation but do not use the % symbol and use two decimals (rounding). For example, if your answer is 0.10469 then enter 10.47; if your answer is 10% then enter 10.00

Your Answer:

Answer 1

Calculations-

Note -

WACC = Weight d* cost of debt(1-tax) +Weight e * Cost of Equity

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