Question
4. . Given the following information for Watson Power Co., find the WACC. Assume the companys tax rate is 21 percent. Debt: 50,000 bonds with
4. . Given the following information for Watson Power Co., find the WACC. Assume the companys tax rate is 21 percent.
Debt: 50,000 bonds with a 4.8 percent coupon outstanding, $1,000 par value, 15 years to maturity, selling for 105 percent of par; the bonds make semiannual payments.
Common stock: 975,000 shares outstanding, selling for $42 per share; the beta is 1.11.
Preferred 85,000 shares of 3.8 percent preferred stock outstanding, currently stock: selling for $60 per share.
Assume par value is $105. Market: 7 percent market risk premium and 2.5 percent risk-free rate.
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