Johnson Industries finances its projects with 40% debt, 10% preferred stock, and 50% common stock.
They issue bonds @yield to maturity of 8.4%.
Preferred Stock cost = 9%
Common stock price Po = $30 per share
Company's dividend is currently $2.00 a share (Div0 = $2.00), and is expected to grow at 6%.
Assume that the floatation cost on debt and preferred stock is zero, and no new stock will be issued.
Tax rate = 30%
Using the constant growth rate model, What is a.) cost of capital and b.) what is the company's WACC?