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Calculate the weighted average cost of capital for a company given the following:       Dividend expected in...

  1. Calculate the weighted average cost of capital for a company given the following:

      Dividend expected in year one: $1.62/share

      Expected dividend growth rate in perpetuity: 3.5%/year

      Current market price of company’s common stock: $13.00/share

      Company’s debt is in the form of 7-year, 11% (annual) bonds with a face value of $1,000 per bond. Current market value of bonds is $1,058.81/bond

      Number of common stocks outstanding: 21,000,000

      Market value of debt and equity combined: $420 million

      The company’s marginal tax rate: 35%

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