Crandall will continue its current policy of financing all capital projects with a mix of 60% debt and 40% common equity. All debt financing is in the form of 6 year coupon bonds selling at par ($1000) with an annual coupon rate of 15%. Equity financing will come entirely out of retained earnings. The current stock price is $125/share, the most recent dividend was $4.55/share and dividends are expected to grow at a constant rate of 10% per year. Find Crandall’s WAAC. (Hint: WAAC=wd rd (1-t) + Ws Ks)
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Wednesday, 29 July 2015
Crandall will continue its current policy of financing all capital projects with a mix of 60% debt and 40% common equity.
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