During the past few years, Super Technologies has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. As the assistant to the financial vice-president, it is your task is to estimate Super's weighted average cost of capital (WACC). The VP has provided you with the following information: 1. The firms' tax rate is 40%. 2. The current market price of Super's outstanding bonds is $1,153.72. The bonds have an annual coupon rate of 12% and make coupon payments semiannually. The bonds mature in 15 years and have a par value of $1,000. New bonds will have a flotation cost of $15 per bond. 3. The current price of the firm's preferred stock is $113.10 per share. The stock has a $100 par value and a 10% annual dividend rate (paid annually). Flotation costs on new preferred stock are expected to be $2.00 per share. 4. = The current price of the firm's common stock is $50 per share. Its last dividend was Do = $4.19 per share. Dividends are paid semiannually and are expected to grow at an annual rate of 5% into the foreseeable future. The flotation cost for newly-issued common stock is 8%. 2020 Balance Sheet (thousands of dollars) cash 102 accounts payable accounts receivable 400 notes payable inventory 438 accruals current assets 940 current liabilities gross fixed assets 2550 long-term debt (bonds) accum. depreciation 550 preferred stock net fixed assets 2000 common stock total assets 2940 paid-in capital retained earnings total common equity total liabilities and equity 325 300 110 735 500 250 125 650 680 1455 2940 During the past few years, Super Technologies has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. As the assistant to the financial vice-president, it is your task is to estimate Super's weighted average cost of capital (WACC). The VP has provided you with the following information: 1. The firms' tax rate is 40%. 2. The current market price of Super's outstanding bonds is $1,153.72. The bonds have an annual coupon rate of 12% and make coupon payments semiannually. The bonds mature in 15 years and have a par value of $1,000. New bonds will have a flotation cost of $15 per bond. 3. The current price of the firm's preferred stock is $113.10 per share. The stock has a $100 par value and a 10% annual dividend rate (paid annually). Flotation costs on new preferred stock are expected to be $2.00 per share. 4. = The current price of the firm's common stock is $50 per share. Its last dividend was Do = $4.19 per share. Dividends are paid semiannually and are expected to grow at an annual rate of 5% into the foreseeable future. The flotation cost for newly-issued common stock is 8%. 2020 Balance Sheet (thousands of dollars) cash 102 accounts payable accounts receivable 400 notes payable inventory 438 accruals current assets 940 current liabilities gross fixed assets 2550 long-term debt (bonds) accum. depreciation 550 preferred stock net fixed assets 2000 common stock total assets 2940 paid-in capital retained earnings total common equity total liabilities and equity 325 300 110 735 500 250 125 650 680 1455 2940