Question
Answer the following for Dave, Inc. based on the following data (please show all work): Bonds Outstanding Price: $850 Par Value: $1,000 Coupon Rate: 7%
Answer the following for Dave, Inc. based on the following data (please show all work):
Bonds Outstanding
Price: $850
Par Value: $1,000
Coupon Rate: 7%
Frequency: Semiannual
Maturity : 15 years
Number of Bonds Out: 1,000
Preferred Stock Shares Outstanding: 100,000
Preferred Stock Dividend (quarterly): $0.75
Preferred Stock Current Price: $30.00
Flotation Costs of Common Stock: 7%
Common Stock Shares Outstanding: 200,000
Common Stock Current Price: $50.00
Common Stock Dividend Growth (perpetual): 3%
Dividend Yield for the next year: 12%
Tax Rate: 40%
Dave's beta: 1.50
Risk-free Rate: 3%
Market Risk Premium: 7%
a. What is the market-value based capital structure of Dave, Inc.?
-Weight of Debt
-Weight of Preferred
-Weight of Common
b. What are the component costs of capital?
-Cost of Debt
-Cost of Preferred
-Cost of Common - RE
-Cost of Common - New Issue
c. What is the WACC?
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