Problem 10-11 WACC and Percentage of Debt Financing Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at $r_d = 8\%$, and its common stock currently pays a $2.75 dividend per share ($D_0 = 2.75$). The stock's price is currently $25.50, dividend is expected to grow at a constant rate of 9\% per year, its tax rate is 40\%, and its WACC is 12.3\%. What percentage of the company's capital structure consists of debt? Round your answer to two decimal places.
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Calculate the after-tax cost of debt: After-tax cost of debt = Interest rate * (1 - Tax rate) After-tax cost of debt = 9% * (1 - 30%) After-tax cost of debt = 9% * 0.7 After-tax cost of debt = 6.3% Show more…
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