A financial analyst at Buckco Ltd. wants to compute the company's weighted average cost of capital (WACC) using the dividend discount model. The analyst has gathered the following data:
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Before-tax cost of new debt
|
8%
|
|
Tax rate
|
40%
|
|
Target debt-to-equity ratio
|
0.8033
|
|
Stock price
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$30
|
|
Next year's dividend
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$1.50
|
|
Estimated growth rate
|
7%
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Buckco's WACC is closest to:
A. 8%.
B. 9%.
C. 12%.