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Author Question: Assume that you are on the financial staff of Michelson Inc., and you have collected the following ... (Read 44 times)

jany123

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on: Aug 7, 2023
Assume that you are on the financial staff of Michelson Inc., and you have collected the following data:

– The yield on the company’s outstanding bonds is 9%, and its tax rate is 38%.

– The next expected dividend is $0.76 a share, and the dividend is expected to grow at a constant rate of 7% a year.

– The price of Michelson’s stock is $18.30 per share, and the flotation cost for selling new shares is F = 11%.

– The target capital structure is 48% debt and the balance is common equity.

What is Michelson’s WACC, assuming it must issue new stock to finance its capital budget?


◦

9.05%


◦

8.42%


◦

8.75%


◦

9.03%

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by jany123 on Aug 7, 2023

mamboz

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Reply #1 on: Aug 7, 2023
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jany123

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Reply 2 on: Aug 7, 2023
Excellent

Animal_Goddess

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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