cost of capital

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Scenario: Wilson Corporation (not real) has a target capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50 per share and next year’s dividend is $2.50 per share that is growth by 4% per year.

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Calculate the company’s weighted average cost of capital. Use the dividend discount model/ Show calculations in Microsoft Word.
The company’s CEO has started if the company increases the amount of long term debtso the capital structure will be 60% debt and 40% equity, this lower its WACC. Explain and defend why you agree or disagree. Report how you would advise the CEO.
Format your paper consistent with APA guidelines.

 

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cost of capital was first posted on November 7, 2019 at 3:45 pm.
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