Question
Show all work for the following including formula by hand (not using excel) Calculate the firms WACC assuming that internally equity will satisfy next years
Show all work for the following including formula by hand (not using excel) Calculate the firms WACC assuming that internally equity will satisfy next years common equity needs. In your solution, in addition to the calculations for WACC, please also show supporting calculations.
Capital component weights, cost of debt, cost of preferred stock, and cost of common equity.
Be sure to use 4 decimal places.
Current assets: 3,100
Property, plant and equipment: 3,400
Total assets: 6,500.
Current liablities: 1,500
Long term debt: 1,750
Preferred stock, $100 par: 500
Common stock, no par: 1,250
Retained earnings: 1,500
Total liabilities and equities: 6,500
Growth rate 7.5%
Coupon on new bonds: 7.75%
Corporate tax rate: 25%
Dividend on preferred: 8%
Price of common stock: $24.00
Price of $100 par value preferred: $75.00
Anticipated common dividend: $1.56
Flotation cost on preferred: $4.00
Flotation cost on common: $2.50
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started