A company has determined that its optimal capital structure consists of 40% debt and 60% equity. Assume the firm will not have enough retained earnings to fund the equity portion of its capital budget, and the cost of capital is adjusted to account for flotation costs. Given the following information, calculate the firm's WACC. - rd = 8%. - Net income = $40,000. - Payout ratio = 50%. - Tax rate = 40%. - P0 = $25. - Growth = 0%. - Shares outstanding = 10,000. - Flotation cost on additional equity = 15%.
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Home » Business » A company has determined that its optimal capital structure consists of 40% debt and 60% equity. Assume the firm will not have enough retained earnings to fund the equity portion of its capital budget, and the cost of capital is adjusted to account