A company's capital structure consists solely of debt and common equity. It can issue debt at rd=11%, and its common stock currently pays a $2.00 dividend per share (Do=$2.00). The stock's price is currently $24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 35%, and it WACC is 13.95%. How do I figure out what percentage of the company's capital structure consists of debt?© BrainMass Inc. brainmass.com June 4, 2020, 2:30 am ad1c9bdddf
rs = D1/P0 + g = $2(1.07)/$24.75 + 7%
= 8.65% + 7% = ...
This solution provides the calculation for a company's capital structure that consists of only debt and common equity. Calculations are provided.