13

Given the following information for Lightning Power Co., find the WACC. Assume the company's tax rate is 21 percent. Debt: 12,000 bonds with a 4.6 percent coupon outstanding, \$1,000 par value, 25 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 575,000 shares outstanding, selling for $81 per share; the beta is 1.04. Preferred stock: 30,000 shares of 3.4 percent preferred stock outstanding, $100 par value, currently selling for $94 per share. Market: 7 percent market risk premium and 3.2 percent risk-free rate. \begin{tabular}{|l|l|l|} \hline \multicolumn{1}{|c|}{ A } & \multicolumn{1}{c|}{ B } \\ \hline 33 & Output Area: \\ \hline 34 & & \\ \hline 35 & Market value of debt \\ \hline 36 & Market value of equity \\ \hline 37 & Market value of preferred \\ \hline 38 & Market value of firm \\ \hline 39 & Weight of debt & \\ \hline 40 & Weight of equity & \\ \hline 41 & Weight of preferred \\ \hline 42 & Pretax cost of debt & \\ \hline 43 & Aftertax cost of debt \\ \hline 44 & Cost of equity \\ \hline 45 & Cost of preferred \\ \hline 46 & WACC \\ \hline 47 & & \\ \hline \end{tabular}