Question
Information on Janicek Power Co., is shown below. Assume the companys tax rate is 35 percent. Debt: 9,000 8 percent coupon bonds outstanding, $1,000 par
Information on Janicek Power Co., is shown below. Assume the companys tax rate is 35 percent. |
Debt: | 9,000 8 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 102.5 percent of par; the bonds make semiannual payments. |
Common stock: | 215,000 shares outstanding, selling for $83.50 per share; beta is 1.20. |
Preferred stock: | 12,500 shares of 5.75 percent preferred stock outstanding, currently selling for $97.50 per share. |
Market: | 7 percent market risk premium and 4.8 percent risk-free rate. |
Required: |
What is the company's cost of each form of financing? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Cost | |
Cost of equity | % |
Aftertax cost of debt | % |
Cost of preferred stock | % |
Calculate the company's WACC. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
WACC | % |
Also explain to me how you got the YTM for this problem.
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