13.25 WACC for a firm: The Imaginary Products Co. currently has $300 million of market value debt outstanding. The 9 percent coupon bonds (semiannual pay) have a maturity of 15 years and are currently priced at $1.440.03 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $12.00. The preferred shares offer an annual dividend of $1.20. Imaginary also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. If Imaginary is subject to a 40 percent marginal tax rate, then what is the firm's weighted average cost of capital? Capital component Bonds Preffered stock Common stock Number outstanding Current price 300,000 1.440.03 2,000,000 12.00 14 000,000 $ 20.00 G Coupon rate on debt Coupon frequency (per year) Bond maturity (years) Preferred dividend (annual) Expected dividend on common (D) Constant annual dividend growth rate (fore Marginal tax rate C 13.3 03.21 13.25 13. 7 19.7 33 2 14,000,000 $ 20.00 Coupon rate on debt Coupon frequency (per year) Bond maturity (years) Preferred dividend (annual) Expected dividend on common (D) Constant annual dividend growth rate (fore Marginal tax rate $1.20 $2.20 5% 40% Weight After-tax cost Weighted Cost (%) Capital componen Market Value Bonds Preferred stock Common stock Total capital market value) 11111111111 WAC IT O type here to search Ball DTANE