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Wacc and Corporate Investment Decisions (Example)

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WACC and Corporate Finance Investment Decisions Name Professor Course Date of Submission WACC and Corporate Finance Investment Decisions Scenario: Wilson Corporation (not real) has a targeted capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50 per share and next year's dividend is $2.50 per share that is growing by 4% per year. Calculate the company's weighted average cost of capital. Use the dividend discount model.  Show calculations in Microsoft Word. The company's CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% = 2.34 + 3.60 = 5.94% WACC (Debt = 40% Equity = 60%) = 6.96% WACC (Debt = 60% Equity = 40%) = 5.94% Conclusion Wilson’s corporation CEO should carry out an increase in the amount of their debt to 60% and equity to 40%.This should be done only if they are able to keep their debt at a manageable level so that they might not end up into serious problems if at all something happened in the future. The CEO should also ensure that the company does not raise its ratios any more for a given duration of time. This will help keep the capital structure of Wilson Corporation at a steady state. [...]

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Scenario: Wilson Corporation (not real) has a targeted capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50 per share and next year's dividend is $2.50 per share that is growing by 4% per year. Prepare a minimum 700-word analysis including the following: Calculate the company's weighted average cost of capital. Use the dividend discount model.  Show calculations in Microsoft® Word. The company's CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC. Explain and defend why you agree or disagree. Report how would you advise the CEO.  Format your paper consistent with APA guidelines

Subject Area: Finance

Document Type: Reports

This project has already been completed by one of the Studybay experts. The client rated this project:

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Price $15

Words 550

Pages 2

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Great paper! Passed plagiarism checker and has really quick turnaround!!

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10.17.2017

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