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FIN - Qualtric Inc. has a target capital structure of 35% debt

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Question;Qualtric Inc. has a target capital structure of 35% debt and the remainder common equity. Qualtric Inc.?s cost of debt on the first $3 million borrowed is 7.5%, but that cost of debt increases to 8.0% for borrowing about the $3 million level. Its tax rate is 30%, its most recent dividend was $1.20 and that dividend has been growing at 2.5% annually and is expected to continue that growth. The current price of Qualtric Inc. stock is $18.50 per share. Flotation costs on new equity are 7.5% and Qualtric Inc. has retained earnings of $4.5 million. What is the WACC if Qualtric Inc.'s total capital expenditure is expected to be $6.5 million?

 

Paper#48587 | Written in 18-Jul-2015

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