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Caspian Sea Drinks' is financed with 66.00% equity and the remainder in debt. They have 11.00-year,...

Caspian Sea Drinks' is financed with 66.00% equity and the remainder in debt. They have 11.00-year, semi-annual pay, 5.42% coupon bonds which sell for 98.93% of par. Their stock currently has a market value of $25.30 and Mr. Bensen believes the market estimates that dividends will grow at 3.62% forever. Next year’s dividend is projected to be $2.82. Assuming a marginal tax rate of 28.00%, what is their WACC (weighted average cost of capital)? round 2 decimals

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Answer #1

Weight of debt = 100% - 66% = 34

WACC = 0.66*0.147662 + 0.34*0.055513*(1 - 0.28)

WACC = 0.097457 + 0.01359

WACC = 0.1110 or 11.10%

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