Corona SoCo

Use the following information for Parts a thru c:

Corona SoCo has the following capital structure.

8.5% First Mortgage Bonds $60,000,000 outstanding.

9% senior sub-ordinated Bonds $50,000,000 outstanding.

Class A preferred stock paying 4.5%, $18,000,000 outstanding.

Class B preferred stock paying 6.0%, $15,000,000 outstanding.

Common Equity $70,000,000 outstanding paying 12%.

Its tax rate is 32%.

Part a:

What is the weighted adjusted rate for the First Mortgage Bonds used in this WACC

calculation?

Part b:

What is Corona SoCos WACC?

Part c:

Corona SoCo is considering the issuance of $20,000,000 project financing bonds for an up-coming capital project. The bonds will be priced at 6.25%.

What is Corona SoCos WACC with this new issue?