The average gong market interest rate for other companies


Watta company has only common equity and bonds. You are asked to estimate Watta Company's WACC and you have the following information: Watta's last stock dividend was $1.20 per share. Its dividend is expected to grow at 8% indefinitely. The stock currently sells for $50 per share. Watta has a target debt-equity ratio of 0.40/0.60 and it can sell 9% 10-year coupon bonds at par value. The average gong market interest rate for other companies' debts currently is 10%. If the tax rate is 35%, what is the WACC? (The company does not have any preferred stocks).

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Financial Management: The average gong market interest rate for other companies
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