Problem:
A firm uses 60% equity and 40% debt forall its financing needs. Shares of thecommon stock sell at $65. The company expects to pay $1.80 in dividends next year and increase that amount by 5% annually. The bonds have a 5.5% coupon rate and a yield to maturity of 6.5%. The company has a beta of 1.4 and a 34 % marginal tax rate.
Required:
Question: What is the firms WACC?
Note: Explain all steps comprehensively.