CALCULATE THE WACC USING THESE FIGURES:

Bonds $35,000,000 (35%)

Preferred Stock $15,000,000 (15%)

Common Equity $50,000,000 (50%)

Total $100,000,000

Data to be used in the calculation of the cost of debt:

Par value = $1,000, non-callable

Market value = $1,085.59

Coupon interest = 6%, annual payments

Remaining maturity = 20 years

New bonds can be privately placed without any flotation costs

Data to be used in the calculation of the cost of preferred stock:

Par value = $100

Annual dividend = 7.5% of par

Market value = $102

Flotation cost = 4%

Data to be used in the calculation of the cost of common equity:

CAPM data:

VECs beta = 1.2

The yield on T-bonds = 3%

Market risk premium = 7%

DCF data:

Stock price = $27.08

Last years dividend (D0) = $2.10

Expected dividend growth rate = 4%

Bond-yield-plus-risk-premium data:

Risk premium = 5.5%

Amount of retained earnings available = $80,000

Floatation cost for newly issued shares = 7%