Question
Given the following information for Lightning Power Co., find the WACC. Assume the companys tax rate is 35 percent. Debt: 8,000 6.5 percent coupon bonds
Given the following information for Lightning Power Co., find the WACC. Assume the companys tax rate is 35 percent.
Debt: 8,000 6.5 percent coupon bonds outstanding. $1,000 par value, 25 years to maturity,
selling for 106 percent of par; the bonds make semiannual payments.
Common stock: 310,000 shares outstanding, selling for $57 per share: the beta is 1.05.
Preferred Stock: 15,000 shares of 4 percent preferred stock outstanding, currently selling for 72 per share.
Market: 7 percent market risk premium and 4.5 percent risk-free rate.
WACC = Kd x Pd + Kpfd x Kpfd + Ke x Pe
The proportions, costs and weighted costs are in decimals to 4 places
Market value | Market Proportions | costs | Weighted Costs | |
Debt | ? | ? | ? | .0122 |
Prefered | 1,080,000 | ? | ? | ? |
Equity | ? | .6489 | ? | ? |
Total | ? | WACC = | ? |
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