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Johnson Industries finances its projects with 40 debt 10 preferred stock and 50 common stock They issue bonds yield to maturity of 84 Preferred Stock cost 9 Common stock price

Johnson Industries finances its projects with 40% debt, 10% preferred stock, and 50% common stock.

They issue bonds @yield to maturity of 8.4%.

Preferred Stock cost = 9%

Common stock price Po = $30 per share

Company’s dividend is currently $2.00 a share (Div0 = $2.00), and is expected to grow at 6%.

Assume that the floatation cost on debt and preferred stock is zero, and no new stock will be issued.

Tax rate = 30%

Using the constant growth rate model, What is a.) cost of capital and b.) what is the company's WACC?

 

Apr 02 2020 View more View Less

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