Weighted average cost of capital Suppose your firm has five sources of funding. They are as follows:
Question:
Weighted average cost of capital Suppose your firm has five sources of funding. They are as follows:
• 400,000 shares of stock currently selling at $12.33 per share. The firm has experienced an average growth rate of 4 % for the past 50 years, and they expect this to continue indefinitely. Their next dividend will be $1.23.
• 100,000 shares of preferred stock that pay an annual dividend of 3 % of face value, which is $25. They are currently selling for $18.77.
• 3,400 corporate bonds currently selling at $1,223.90 and yielding 6.54 %.
They have 13 years left until maturity and a coupon rate of 9.15 %.
• 1,945 corporate bonds currently selling for $884.44. They have a coupon rate of 7.36 % and 14 years left until maturity. The bonds have a current yield to maturity of 8.83 %.
• A bank loan of $1,000,000. The interest rate on the loan is 7.5 %.
What is your firm’s WACC?
Step by Step Answer:
Applied Corporate Finance Questions Problems And Making Decisions In The Real World
ISBN: 9781493952991
1st Edition
Authors: Mark K. Pyles