FIN370 – Targeted capital structure of 40% long term debt and 60% common stock

Targeted capital structure of 40% long term debt and 60% common stock.The debt is yielding 6% and the corporate tax rate is 35%.The common stock is trading at $50 per share and next year’s dividend is $2.50 per share that is growing by 4% per year.Calculate the company’s weighted average cost of capital using the dividend discount model. Show calculations in a Word Doc.The company’s CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC. Explain and defend why you agree or disagree. Report how would you advise the boss with a 700 word count analysis.