Question
Please usethe following information to answer the questions: A company has asked you to compute its WACC. You have gathered the following information: Debt: 25,000,
Please usethe following information to answer the questions:
A company has asked you to compute its WACC. You have gathered the following information:
Debt:25,000, 7% coupon bonds outstanding, 15 years to maturity, selling for 92% of par. The bonds have $1000 par and make semi-annual payments.
Common Stock:450,000 shares outstanding selling for $75 per share, the beta is 1.3.
The expected return on the market is 13%, the risk-free interest rate is 5%.
Preferred Stock:10,000 shares outstanding, selling for 100 per share, the annual dividend is $12.
The company's tax rate is 21%.
1-Find the company's after-tax cost of debt (please express your answer in hundredths and in percent without the percentage sign)
2- Find the cost of raising $1 of preferred stock (please express your answer in hundredths and in percent, without the percentage sign)
3- Find the cost of raising $1 of common equity.Please express your answer in hundredths, and as a percentage but without the percent sign.
4- Find the value of the firm.
5- Find the MV weight for debt (to the nearest thousandth)
6- Find the MV weight for preferred stock (to the nearest thousandth)
7- Find the MV weight for common stock (to the nearest thousandth)
8- Find the WACC.Express your answer as a percentage without the percentage sign and two digits after the decimal.
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