Question
ABC Inc.'s capital structure is 40% debt, 15% preferred, and 45% common equity, and its tax rate is 40%. For financing, (a) ABC sold a
ABC Inc.'s capital structure is 40% debt, 15% preferred, and 45% common equity, and its tax rate is 40%. For financing, (a) ABC sold a non-callable bond several years ago that now has 15 years to maturity with 8% annual coupon, paid semiannually, at a price of $1,065, and a par value of $1,000. (b) ABC sold a perpetual preferred stock for $95.50 per share, with a $7.50 annual dividend and a flotation cost of 3.00% of the price. (c) ABC also has beta = 1.15, risk free rate of return rRF = 6.00%; market risk premium RPM = 7.00%;
The question is: What is the company's WACC?
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