NEW YORK INSTITUE OF TECHNOLOGY SCHOOL OF MANAGEMENT (Department of Accounting&F

Question

NEW YORK INSTITUE OF TECHNOLOGY SCHOOL OF MANAGEMENT (Department of Accounting&Finance;) Corporate Finance (FINC 201 OUIZ8 Nov.08.2017 Prof. Raja Nag Name: Maximum time: 15 minutes Manning Corporation has established a target capital structure of 30 percent debt and 70 percent common equity. The current market price of the firm's stock is Po $28: its last dividend was Do -$2.50, Maturity) of Mannings outstanding bonds is 1 196, and its marginal tax rate is 40%. Manning can finance its equity portion with retained earnings. Find the weighted average cost of capital (WACC) of Manning Corporation. and its expected dividend growth rate is 5 percent constant. The YTM (Yield to

Explanation / Answer

cost of equity = 2.5*1.05/28 + 5% = 14.375%

WACC of the firm = 0.3*11%*0.6 + 0.7*14.375% = 12.04%

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