You have the following information about a company: Targeted capital structure of 40% long term debt and 60% common stock.
The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50.00 per share and next year's dividend is $2.50 per share that is growing by 4% per year.
You need to calculate the company's weighted average cost of capital. using the dividend discount model.
And show my calculations. You also need to know if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC.
Explain and defend why you would agree or disagree. and Report how you would advise the company of their condition.