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Harrington Enterprises You have been asked to calculate the weighted average cost of capital ( WACC ) for Harrington Enterprises. Here are some facts: ,

Harrington Enterprises
You have been asked to calculate the weighted average cost of capital (WACC) for Harrington
Enterprises. Here are some facts:
, Marginal tax rate =0.30.
Harrington 8% semiannual bonds are trading at $748.99 and have 12 years left to mature.
Harrington 10% preferred (annual) stock with 100 par value is trading at $108.
Harrington's optimal capital structure is 40%10%50% across debt, preferred stock and
equity, respectively.
Common stock for Harrington is trading at $80 per share.
The last dividend paid by Harrington was $7.62 and the growth rate in dividends is
expected to be 5% indefinitely.
Harrington's beta is 2.2
The current T-bill yield is 4%.
The Market risk premium is five percent.
Harrington sometimes uses the bond-yield-plus-risk-premium approach. When it does, it
uses a risk premium of 2.64%.
If Harrington issues new common stick, the flotation costs will be fifteen percent.
$1,000,000mil= Harrington's current amount in the retained earnings account.
Please calculate (showing all work):
a) Harrington's component cost of debt
b) Harrington's component cost of preferred stock.
c) The NPV of project C, which would cost $80 today, and pay a cash flow of $30 each
year over the next 3 years.
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