Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Show the work please Given the following information for Watson Power Co., find the WACC. Assume the company tax rate is 20 percent. Debt: 12,000

Show the work please

Given the following information for Watson Power Co., find the WACC. Assume the company tax rate is 20 percent.

Debt: 12,000 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 97 percent of par (meaning its current price is $970). The bonds make semiannual coupon payments. Floatation cost is $6.

Preferred stock: 30,000 shares of preferred stock outstanding currently pay $4.20 per share dividends, sell for $58 per share with floatation cost of $2.

Common stock: 510,000 shares outstanding, selling for $75 per share; the beta is 1.22.

Market: 9 percent market risk premium and 3 percent risk-free rate.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Venture Capital And The Finance Of Innovation

Authors: Andrew Metrick, Ayako Yasuda

3rd Edition

1119490111, 978-1119490111

More Books

Students also viewed these Finance questions

Question

=+ Where, how, why, and when are the products to be bought abroad?

Answered: 1 week ago