A Firm Has a WACC of 12

question 178

Multiple Choice

A firm has a WACC of 12%. It is financed with 40% debt and 60% equity. The firm's cost of debt is 10% and its tax rate is 40%. If the firm's dividend growth rate is 8% and its current stock price is $40, what is the value of the next dividend the firm is expected to pay?

• A) Less than $3.00.
• B) Between $3.01 and $3.50, inclusive.
• C) Between $3.51 and $4.25, inclusive.
• D) Greater than $4.25.
• E) Cannot be determined without additional information.

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Definitions:

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