Problem: Jersey devil inc is estimating its WACC. its target capital structure is 20% debt, 20% preferred stock, and 60% equity. its bonds have a 12% coupon, paid semiannually, a current maturity of 20 yrs, and sell for $950. the firm could sell at par $100 preferred stock which pays a 12% annual dividend, but flotation costs of 5% would be incurred. Jersey Devil is a constant growth firm that just pais a dividend of $2.00 on its common stock selling for $27.00 per share. Jersey Devils constant growth rate is 8%. The firm is not expected to have to issue new common stock for its upcoming budget and therefore will rely on retained earnings for the 60% in equity that it will need. the firm marginal tax rate is 40%.
- What is the firms after tax cost of debt?
- What is the firms cost of preferred stock?
- What is the firms cost of common stock?
- What is the firms weighted average cost of capital?