Question
The Bluefield corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of eight dollars and
The Bluefield corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of eight dollars and 200,000 $1000 par value bonds with a 10% coupon. the bonds pay interest semiannually and have 20 years to maturity.
At present to the common stock is selling for $50 per share, the bonds are selling for $950.62 each, and the preferred stock is selling at $74 per share. the estimated return on the market is 13%, and the risk free rate is 8%. Bluefield has a beta of 1.4 and a tax rate of 30% estimate the cost of each source of financing, the weights to apply to each source and the WACC, than match each item with the appropriate answer:
1 rate of equity?
2 rate of debt after tax?
3 rate of preferred stock?
4 weight of equity?
5 weight of debt?
6 weight of preferred stock?
7 weighted average cost of capital?
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