Quinlan Enterprises Stock Trades for $52

question 28

Multiple Choice

Quinlan Enterprises stock trades for $52.50 per share.It is expected to pay a $2.50 dividend at year end (D₁ = $2.50) ,and the dividend is expected to grow at a constant rate of 5.50% a year.The before-tax cost of debt is 7.50%,and the tax rate is 40%.The target capital structure consists of 45% debt and 55% common equity.What is the company's WACC if all the equity used is from reinvested earnings?

• A) 7.07%
• B) 7.36%
• C) 7.67%
• D) 7.98%
• E) 8.29%

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Definitions:

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