Sorensen Systems Inc

question 69

Multiple Choice

Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50) , the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. 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 retained earnings?

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

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