Problem 14-15 Finding the WACC

Given the following information for Watson Power Co., find the WACC. Assume the company's tax rate is 21 percent. Debit: 10,000 6.4 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments.

Common stock: 495000 shares outstanding, selling for $63 per share; the beta is 1.15.

Preferred stock: 35,000 shares of 3.5 percent stock outstanding, currently selling for $72 per share.

Market: 7 percent risk premium and 3.2 percent risk-free rate

Complete the following analysis. Do not hard code values in your calculations. Leave the "Basis" input blank in the YIELD function. You must use the built-in Excel function to answer this question.