Exercise 12-31 (Algo) Weighted-Average Cost of Capital (WACC) (LO 12-4) Below is information regarding the capital structure of Micro Advantage Incorporated. On the basis of this information you are asked to respond to the following three questions: Required: 1. Micro Advantage issued a $5,250,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 9%. Today, the bond is selling at 115 (i.e., 115% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,150,000 preferred stock outstanding that it sold for $23 per share. The preferred stock has a per share par value of $24 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the after-tax cost of the preferred stock? 3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 75,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $140 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted average cost of capital (WACC)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Micro Advantage issued a $5,250,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 9%. Today, the bond is selling at 115 (i.e., 115% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? (Round your answer to 2 decimal places. (i.e. .1234 = 12.34%)) Current after-tax cost of this debt % Required 1 Required 2 > Required 1 Required 2 Required 3 Micro Advantage has $5,150,000 preferred stock outstanding that it sold for $23 per share. The preferred stock has a per share par value of $24 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the after-tax cost of the preferred stock? (Round your answer to 2 decimal places. (i.e. .1234 = 12.34%)) After-tax cost of the preferred stock % Required 1 Required 2 Required 3 In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 75,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $140 per share. The expected after-tax market return on the firm's common equity is 20%.What is Micro Advantage's weighted average cost of capital (WACC)? (Round "Interest or Dividend Rate", "After-tax Rate or Expected Return" and "Cost of Capital Components" to 2 decimal places (i.e. .1234 = 12.34%), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.) Show less Book Value Interest or Dividend Rate % Weights After-tax Rate or Expected Return % Current Market Values Cost of Capital Components % Bond % Preferred Stock Common Stock Total % % % % % 0.00 % $ $ 0.000
