Preference Shares and WACC Bottled Water is a listed European company, which has a corporate finance structure
Question:
Preference Shares and WACC Bottled Water is a listed European company, which has a corporate finance structure as shown below. What is the company’s WACC?
Debt: 50,000 bonds with a quoted price of 119.80, providing an 8 per cent coupon rate.
The bonds have 25 years to maturity. There are also 150,000 zero-coupon bonds outstanding, with a quoted price of 13.85 and 30 years until maturity.
Preferred stock: 120,000 shares of 6.5 per cent preferred with a current price of €112 and a par value of €100.
Common stock: 2 million shares of common stock. The current share price is €65, and the beta of the stock is 1.1.
Market: The corporate tax rate is 40 per cent, the market risk premium is 5 per cent, and the risk-free rate is 4 per cent.
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