Hatch Corporation’s target capital structure is 40 percent debt, 50 percent common stock, and 10 percent preferred stock. Information regarding the company’s cost of capital can be summarized as follows: The company’s bonds have a nominal yield to maturity of 7 percent. The company’s preferred stock sells for $ 40 a share and pays an annual dividend of $ 4 a share. The company’s common stock sells for $ 25 a share and is expected to pay a dividend of $ 2 a share at the end of the year (i.e. D1=$2.00). The dividend is expected to grow at a constant rate of 7 percent a year. The company has no retained earnings. The company’s tax rate is 40 percent. What is the company’s weighted average cost of capital (WACC)
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