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Weighted average cost of capital (WACC)

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7.) Hillard Corp. wants to calculate its weighted average cost of capital (WACC). The company's CFO has collected the following information:

? The company's long-term bonds currently offer a yield to maturity of 8%
? The company's stock price is $32 per share (Po=$32)
? The company recently paid a dividend of $2 per share (Do=$2.00)
? The dividend is expected to grow at a constant rate of 6% a year (g=6%)
? The company pays a 10% flotation cost whenever it issues new common stock (F=10%)
? The company's target capital structure is 75% equity and 25% debt
? The company's tax rate is 40%
? The company anticipates issuing new common stock during the upcoming year.

What is the company's WACC?

See the attached file.

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Solution Summary

This provides the steps to calculate the weighted average cost of capital (WACC).

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7.) Hillard Corp. wants to calculate its weighted average cost of capital (WACC). The company's CFO has collected the following information:

? The company's long-term bonds ...

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