Question
A company has 10 million shares of common stock outstanding, 900,000 shares of preferred stock paying a $3 annual dividend, and 100,000 4% coupon bonds
A company has 10 million shares of common stock outstanding, 900,000 shares of preferred stock paying a $3 annual dividend, and 100,000 4% coupon bonds outstanding that make coupon payments semiannually and have a par value of $1,000. The common stock currently sells for $35 per share and has a beta of 0.9, the preferred stock currently sells for $75 per share, and the bonds have 5 years to maturity and sell for $1,050. The market risk premium is 8%, T-bills are yielding 3.8%, and the firm's tax rate is 40%.
(Use Financial Calculator)
A.) What is the firm's cost of equity capital?
B.) What is the firm's the pre-tax cost of debt?
C.)What is the firms cost of preferred stock?
D.)What is the firms WACC?
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