4. Marshall Inc.’s balance sheet shows $250 million in debt…
4. Marshall Inc.’s balance sheet shows $250 million in debt and $500 million in total common equity. Additional information for the company is provided below (1)The firm’s noncallable bonds mature in 20 years, have a 7.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. (2) The company’s tax rate is 25%. (3) The next expected dividend is $1.2 a share; the dividend is expected to grow at a constant rate of 6.00% a year; the price of the stock is $28.00 per share; the flotation cost for selling new shares is F = 8%. What is the firm’s weighted average cost of capital (WACC), assuming it must issue new stock to finance its capital budget? (10’)
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