Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show ALL work. Thank you Given the following information for Syarikat Co. find the WACC. The company's tax rate is 35%. Debt: 7,000 8%

Please show ALL work. Thank you

image text in transcribed

Given the following information for Syarikat Co. find the WACC. The company's tax rate is 35%. Debt: 7,000 8% coupon bonds outstanding, 20 years to maturity. soiling for 104% of par. bonds make semiannual payments Common Stock: 120,000 shares outstanding, selling for $82 per share, beta is 1.20 Preferred Stock: 10,000 shares preferred stock outstanding, $8.25 dividend, currently selling for $80 per share Market: 7%. market risk premium and 4.5% risk-free rate Your task is the following: To find the weighted average cost of capital. But in order to do so. you must find all the other component costs first. For instance in the case debt, you must know the coupon rate, par value, years to maturity, payment, number of bonds outstanding. current price, and total value the debt and the cost of debt before and after tax. You MUST show each calculation and the final cost of debt. To simplify matters for you. all the variables are listed in the box for cost of debt. The same thing applies to the other costs and for calculating the weight; Using all these information you calculate the WACC. Weights Total Market Value of the Firm = Total Value of Debt + Total Value CS + Total Value PS Total Market Value of the Firm = Weight of Debt w = Value debt t value of the firm Weight of CS w = value common stock/value of the firm Weight of PS w = value of preferred stock/value of the firm WACC = w. r. + w, r, = w r (1 - T) WACC = WACC =

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

Conduct a needs assessment. page 269

Answered: 1 week ago