Question
Information on Gerken Power Co., is shown below. Assume the company's tax rate is 38 percent. Debt: 9,800 9.3 percent coupon bonds outstanding, $1,000 par
Information on Gerken Power Co., is shown below. Assume the company's tax rate is 38 percent.
Debt: 9,800 9.3 percent coupon bonds outstanding, $1,000 par value, 22 years to maturity, selling for 97.5 percent of par; the bonds make semiannual payments.
Common stock: 223,000 shares outstanding, selling for $84.30 per share; beta is 1.28.
Preferred stock: 13,300 shares of 5.9 percent preferred stock outstanding, currently selling for $96.70 per share.
Market: 7.15 percent market risk premium and 4.95 percent risk-free rate.
What is the company's cost of each form of financing?(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimalplaces, e.g., 32.16.)
Cost of equity %
Aftertax cost of debt %
Cost of preferred stock %
Calculate the company's WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)
WACC %
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