calculate its weighted average cost of capital (WACC

Jacobs
Corp. wants to calculate its weighted average cost of capital (WACC).
The

company’s
CFO has collected the following information:

The
company’s 30 year long-term bonds with 8% semiannual coupon are
currently

sold
at $950. The firm can issue bonds only

$100
million at this price. Beyond this

amount,
the firm can issue the bonds at the same price, but the firm has to
pay 9%

semiannual
coupon.

The
company’s current stock price is $25 per share (P0 = $25).

The
company recently paid a dividend of $2 per share (D0 = $2.00).

The
dividend is expected to grow at a constant rate of 5 percent a year
(g = 6%).

The
company pays a 10 percent flotation cost whenever it issues new
common

stocks
(F = 10%).

The
company’s balance sheet shows 70% common stock and 30% debt.

The
company’s target capital structure is 80% common stock and 20%
debt.

The
firm expects to earn

$800
million

in
after-tax income during the coming year,

and
it will retain 80 percent of those earnings.

The
company’s tax rate is 21 percent.

What
is the company’s WACC if it must fund a capital budget requiring
$700million i

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