Government regulations from the U.S. Department of Agriculture (USDA) require that a Fortune 500 corporation implement the HACCP (Hazards Analysis and Critical Control Points) food safety program in its beef processing plants in 21 states. To finance the equipment and personnel training portions of this new program, Wholesome Chickens expects to use a D-E mix of 60%-40% to finance a $10 million effort for improved equipment, engineering, and quality control. After-tax cost of debt capital for loans is known to be 9.5% per year. However, obtaining sufficient equity capital will require the sale of common stock, as well as the commitment of corporate retained earnings.

Use the following information to determine the WACC for the implementation of HACCP. Common stock: 100,000 shares Anticipated price = $32 per share Initial dividend = $ 1.10 per share Dividend growth per share = 2% annually Retained earnings: same cost of capital as for common stock

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