1 Chapter 9 Mini-Case 13% 20 1,153.72 75,000 30% a. Calculate the cost of each capital component, After tax cost of debt Cost of preferred stock (including flotation costs): Cost of common equity, dividend growth approach Cost of common equity, CAPM: Judgemental risk premium method b. Assuming that the company will continue to use the same capital structure, what is the company's WACC? 100 12% 132 1,500,000 6% c. Average the 3 common percentages d. What is the company's WACC using the price, number of each capital item and the calculated costs from a and c? 2 3 4 Bonds 5 Coupon 6 Years left 7 Price 8 Bonds 9 Tax 10 11 Preferred Stock 12 Par 13 Dividend 14 Price 15 Shares 16 Float 17 18 Common Equity 19 Price 20 Dividend 21 Growth 22 Shares 23 Beta 24 Risk free 25 Risk Premium 26 ROE 27 Dividend Payout 28 Judmental risk 29 30 Capital Structure 31 Debt 32 Preferred 33 Common 34 35 50 3.21 5.90% 3,500,000 1.2 5.50% 6% 15% 65% 3.20% 30% 10% 60%