Question
Marsha Corporation is financed as follows: --60,000 bonds with market values of 92% of face value of $1,000. --80,000 shares of preferred stock trading in
Marsha Corporation is financed as follows:
--60,000 bonds with market values of 92% of face value of $1,000.
--80,000 shares of preferred stock trading in an active market at $15 per share
--1,000,000 shares of common stock trading in an active market at $32 per share
--The bonds pay $60 interest payments annually, have a face value of $1,000 and trade in the market at $920
--The preferred stock pays a $2.00 dividend with no growth.
--The common stock has a beta of 1.5, the risk-free rate is 3.5%, and the market risk premium is 6%.
Given the information above, what is the weighted average cost of capital for Marsha Corporation?
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