Question
Q3. Suppose Westerfield Co. has the following financial information: Debt: 50,000 bonds outstanding with a face value of $1,000. The bonds currently trade at 106%
Q3. Suppose Westerfield Co. has the following financial information:
Debt: 50,000 bonds outstanding with a face value of $1,000. The bonds currently trade at 106% of par and have 10 years to maturity. The coupon rate equals 5%, and the bonds make semi-annual interest payments. Preferred stock: 500,000 shares of preferred stock outstanding; currently trading for $108 per share and it pays a dividend of $7.25 per share every year. Common stock: 1,250,000 shares of common stock outstanding; currently trading for $65 per share. Beta equals 0.88. Market and firm information: The expected return on the market is 10%, the risk-free rate is 1.5%, the tax rate is 21%
Calculate the before-tax cost of debt. (Enter percentages as decimals and round to 4 decimals) Calculate the cost of common stock. (Enter percentages as decimals and round to 4 decimals) Calculate the weighted average cost of capital.(Enter percentages as decimals and round to 4 decimals) |
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