Calculate the wacc for PG given the following: the company has outstanding debt that matures in 20 years that has a coupon of 9%. It pays interest semi-annually and the bon% premium to par is 1214.59. For a reference 20 year treasuries are yielding 3.5%. PG has outstanding preferred coupon, par value and is currently priced at $120. If new preferred was issued the company would incur flotation costs of 5%. The company's stock is currently priced at $100 and the current dividend is $3.00.That dividend is expected to grow at 3% forever. The beta of PG is 0.6 and the RFR and MRP are 3% and 7% respectively. Ignore flotation costs for your cost of equity.
The target structure is 60% equity, 30% debt and 10% preferred. The tax rate is 40%.
If the company had no residual cash and new issued equity would incur a flotation cost of 10%.Calculate a new the WACC using only the DCF method for equity and keeping all other factors the same. Comment on your findings