Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 13 % debt and the rest common equity. What is the company's WACC if all the equity used is from retained earnings?.

1. Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend
is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for
$50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital
structure consists of 13 % debt and the rest common equity. What is the company's WACC if all
the equity used is from retained earnings?