Question
JKT Corporation has 9 million shares of common stock outstanding, 250,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond
JKT Corporation has 9 million shares of common stock outstanding, 250,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the following
(a) Firms market value capital structure. (10 marks)
(b) Cost of equity. (3 marks)
(c) Cost of preferred stock. (2 marks)
(d) Cost of debt. (8 marks)
(e) Weighted Average Cost of Capital (WACC). (2 marks)
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