Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings?© BrainMass Inc. brainmass.com October 10, 2019, 2:14 am ad1c9bdddf
Answer: We have,
Dividend growth rate 5.50%
The solution determines what is the company's WACC if all equity used is from retained earnings.