Question
Solve not in excel. Provide all the formulas. Cost of capital( WACC) Your task is to find the cost of capital (WACC) for a coupon.
Solve not in excel. Provide all the formulas.
Cost of capital( WACC)
Your task is to find the cost of capital (WACC) for a coupon. The company has 2 sources of capital available. Marginal cost rate for the company is 35%
Common stock: 200000 shares outstanding with the accounting book value of 30$ but the company was recently able to issue new stock with a price of 40$. The company paid recently out 3,5$ as dividends and expects dividends to grow by 2% annually within forseen future.
Debt1: 2500 discount (e.g zero coupon) bonds with 1000$par value and 4 years to maturity. Bonds currently offer 6%field to bondholders.
Debt2: The company has also recently obtained financing from the bank. The current loan balance is $3 000 000 and the annual interest changed by is 2,2%
a) Estimate the capital structure weight's for each source when necessary.
b) Find the cost of capital (WACC) for the company.
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