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WACC and Percentage of Debt Financing

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Hook Industries has a capital structure that consists solely of debt and common equity. The company can issue debt at 11%. Its stock currently pays a $2 dividend per share (D0=$2), and the stock's price is currently $24.75. The company's dividend is expected to grow at a constant rate of 7% per year; its tax rate is 35%; teh company estimates that its WACC is 13.95%. What percentage of the company's capital structure consists of debt financing?

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Solution Summary

Calculation with formula.

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Manal Elkhoshkhany, MBA
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  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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