Question
Brookfield Railway Ltd has the following securities outstanding: Corporate bond: 20,000, 5.0% coupon bonds outstanding, at $1,000 face value, with 15 years to maturity. The
Brookfield Railway Ltd has the following securities outstanding:
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Corporate bond: 20,000, 5.0% coupon bonds outstanding, at $1,000 face value, with 15 years to maturity. The bond is currently trading at par value.
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Ordinary shares: 1,000,000 ordinary shares selling for $50 per share. The share will pay a dividend of $3 next year. The dividend is expected to growth by 4% per year indefinitely.
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Preference shares: 125,000, 6% preference shares (face value of $100) selling at $80 per shares.
Assume tax rate is 30%. Calculate the WACC for Brookfield Railway Ltd.
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