The company has 500,000 shares. The dividend to be paid after one year is expected to be EUR 1.5 per share, after which the dividend is expected to increase by 3% per year. Investors' return requirement per share is 13%. In addition, the company has issued a bond with a maturity of four years. The bond has a nominal value of EUR 3 million and a coupon rate of 8%. The Netherlands government risk-free bonds, on the other hand, currently have a 2% annual yield (“yield to maturity”) and the company has a credit rating corresponding to a 3% risk premium (ie the yield requirement above the risk-free interest rate).
What is the weighted average cost of capital (WACC) of a company if the corporate tax rate is 20%?
Select one:
a. 9.0%
b. 9.4%
c. 9.8%
d. 10.2%
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