Company X is considering changing its capital structure - 71019

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Company X is considering changing its capital structure in light of the tough business environment. Currently, Company X’s total capital consists of:




·         $950 million in debt




·         $20 million in leased assets    




·         $500 million of preferred stock    




·         $900 million in common stock   




·         $750 million in retained earnings         




The debt coupon is 8% and tax rate is 40%, while the current preferred share price is $96.20 and the dividend per share is $9.




The company's common stock is trading at $25.50, its dividend payout this year is $1.15, and the growth rate of the dividend is 8.5%.        




 Leases are at an average cost of 8%.         




·         Find the weighted average cost of capital given the data above.





·         If Company X wants to change its capital structure (i.e., lower its WACC), what should it do?  

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Company X WACC SOlution.xlsx
Company X WACC ...