Gator products company gpc is at its optimal capital


Gator Products Company (GPC) is at its optimal capital structure of 70 percent common equity and 30 percent debt. GPC’s WACC is 14 percent. GPC has a marginal tax rate of 40 percent. Next year’s dividend is expected to be $2 per share, and GPC has a constant growth in earnings and dividends of 6 percent. The cost of common equity used in the WACC is based on retained earnings, while the before-tax cost of debt is 12 percent. What is GPC’s current equilibrium stock price?

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Financial Management: Gator products company gpc is at its optimal capital
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