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Given the following information for MaCumber Energy: Debt 7,0006 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity selling for 106 percent of
Given the following information for MaCumber Energy: Debt 7,0006 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity selling for 106 percent of par, the bonds make semi-annual payments Preferred shares 15,000 shares paying a dividend of $3.85 per preferred shares outstanding currently selling at $72 per share Common shares - 300,000 common shares outstanding. selling at $55 per share. McSumber Corporate Tax Rate: 35% Table 1 - Market data: a) Calculate the average Rick free rate (Rt). Return from the market (Rm) and beta () from data collected in the last ten years in Table 1. b) Calculate the market value of each component of the capital structure of the company. c) Calculate the cost of debt, cost of preferred shares and cost of common shares. Note: Use CAPM for the cost of common shares using your averages for RfRm and Beta d) Calculate the weighted average cost of capital (WACC) for MaCumber Energy
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