Allegiance’s target capital structure calls for 35 percent debt, 5 percent prefe

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Allegiance’s target capital structure calls for 35 percent debt, 5 percent preferred stock, and 60 percent common equity. The cost of new debt would be 10 percent with a tax rate of 40 percent. Currently Allegiance’s preferred stock is selling for $95.00 per share and pays and annual dividend of $9.00. Their common stock is selling for $25.50 per share, its last dividend issues were $1.50 and its expected growth rate is 7.5 percent. What is Allegiance’s WACC? If Allegiance had to issue new stock it would cost 12 percent. What is their new re?

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Allegiance’s target capital structure calls for 35 percent debt, 5 percent prefe

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