QUESTION 4

1. Rocket Rentals LLC recently hired you as a consultant to estimate the company's WACC. You have obtained the following information

   (1) The firm has non-callable bonds that mature in 15 years, have a 5.5% annual coupon, a par value of $1,000, and are currently trading on the market for $1,035 (2) The company's tax rate is 22% (3) The market risk premium is 7.25%, the risk free rate is 2.5%, and the company's beta is 1.20. (4) Preferred stock currently trades at $50 and has a divided of $3.50 per share (5) The target capital structure is 35% debt, 10% preferred stock, and 55% common stock

   What is the pre-tax cost of debt? please round two decimal points. Example, you calculate the cost of debt as .03698 then you enter 3.7%

   n
   i
   PV
   PMT
   FV

   What is the cost of common stock? please list as a percentage and round two decimal points. For example .17383 you would enter 17.38%

   What is the cost of preferred stock?

   What is the WACC?