Please fill in highlighted cells and find WACC at the bottom.

Figure 9-1 MicroDrive, Inc.: Selected Capital Structure Data (Millions of Dollars, December 31, 2019) Investor-Supplied Capital Book Market Percent Market Percent of Total Value of Total Percent of Total Book Value Target Capital Structure 200 5.5% 4.2% $ 150 5.0% $ 150 5.7% Wstd = 150 400 $ 750 11.1% 520 520' 17.3% 520 19.8% Wa= 20% Liabilities and Equity Accounts payable Notes payable Accruals Total C.L. Long-term debt Total liabilities Preferred stock Common stock Retained earnings Total common equity Total 100 100 3.3% 100 3.8% Wps = 2% $1,270 100 500 1,740 $2,240 $3,610 20.8% 14.4% 35.2% 2.8% 13.9% 48.2% 62.0% 100.0% W. = $2,240 $3,010 74.4% 100.0% $1,860 $2,630 70.7% 100.0% 60 $31.00 Other Data (Millions, except per share data): Number of common shares outstanding = Price per share of common stock = Number of preferred shares outstanding = Price per share of preferred stock = Coupon rate on preferred stock = Flotation cost for issuing preferred stock = $100.00 7.00% Coupon rate on long-term debt = Par long term debt = Market value long term debt = Interest rate on short-term debt = Risk-free rate = Beta = Market risk premium = Tax rate = 10.00% $1,000 $1,200 6.00% 5.02% 1.33 6.00% 25% 2.10% Notes: 1. The market value of the notes payable is equal to the book value. Existing long term bonds have a maturity of 15 years and 10% semi-annual coupon (par of $1,000) that is currently traded at $1,200. 2. The common stock price is $31 per share. There are 60 million shares outstanding, for a total market value of equity of $31(60) = $1,860 million. 3. The preferred stock price is $100 per share. There are 1 million shares outstanding, for a total market value of preferred of $100(1) = $100 million. 9-8 The Weighted Average Cost of Capital (WACC) The weighted average cost of capital (WACC) is calculated using the firm's target capital structure together with its after-tax cost of long-term debt, after-tax cost of short-term debt, cost of preferred stock, and cost of common equity. WACC = Weighted average cost of capital = Wara(1 - T) + Wsta(1 - Trsta + Wps I'ps + Wers A firm's target capital structure consists of the following capital structure. Using the relevant costs calculated previously, what is the firm's weighted average cost of capital? T= Wstd 25% 4% 20% 2% 74% Istd ra= Wa= Ips Wps = Ws = Short- term Debt Sources of Capital Long-term Preferred Common Debt Stock Stock Pre-tax cost of capital source, r: After-tax cost of debt, (1-T)(n): Cost of capital component for WACC: Target capital structure weight, w 0% = Sum Weighted component cost: 0.00% = Sum WACC = Figure 9-1 MicroDrive, Inc.: Selected Capital Structure Data (Millions of Dollars, December 31, 2019) Investor-Supplied Capital Book Market Percent Market Percent of Total Value of Total Percent of Total Book Value Target Capital Structure 200 5.5% 4.2% $ 150 5.0% $ 150 5.7% Wstd = 150 400 $ 750 11.1% 520 520' 17.3% 520 19.8% Wa= 20% Liabilities and Equity Accounts payable Notes payable Accruals Total C.L. Long-term debt Total liabilities Preferred stock Common stock Retained earnings Total common equity Total 100 100 3.3% 100 3.8% Wps = 2% $1,270 100 500 1,740 $2,240 $3,610 20.8% 14.4% 35.2% 2.8% 13.9% 48.2% 62.0% 100.0% W. = $2,240 $3,010 74.4% 100.0% $1,860 $2,630 70.7% 100.0% 60 $31.00 Other Data (Millions, except per share data): Number of common shares outstanding = Price per share of common stock = Number of preferred shares outstanding = Price per share of preferred stock = Coupon rate on preferred stock = Flotation cost for issuing preferred stock = $100.00 7.00% Coupon rate on long-term debt = Par long term debt = Market value long term debt = Interest rate on short-term debt = Risk-free rate = Beta = Market risk premium = Tax rate = 10.00% $1,000 $1,200 6.00% 5.02% 1.33 6.00% 25% 2.10% Notes: 1. The market value of the notes payable is equal to the book value. Existing long term bonds have a maturity of 15 years and 10% semi-annual coupon (par of $1,000) that is currently traded at $1,200. 2. The common stock price is $31 per share. There are 60 million shares outstanding, for a total market value of equity of $31(60) = $1,860 million. 3. The preferred stock price is $100 per share. There are 1 million shares outstanding, for a total market value of preferred of $100(1) = $100 million. 9-8 The Weighted Average Cost of Capital (WACC) The weighted average cost of capital (WACC) is calculated using the firm's target capital structure together with its after-tax cost of long-term debt, after-tax cost of short-term debt, cost of preferred stock, and cost of common equity. WACC = Weighted average cost of capital = Wara(1 - T) + Wsta(1 - Trsta + Wps I'ps + Wers A firm's target capital structure consists of the following capital structure. Using the relevant costs calculated previously, what is the firm's weighted average cost of capital? T= Wstd 25% 4% 20% 2% 74% Istd ra= Wa= Ips Wps = Ws = Short- term Debt Sources of Capital Long-term Preferred Common Debt Stock Stock Pre-tax cost of capital source, r: After-tax cost of debt, (1-T)(n): Cost of capital component for WACC: Target capital structure weight, w 0% = Sum Weighted component cost: 0.00% = Sum WACC =