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The bond of Company ABC has 3 years to maturity. The bonds coupon rate is 10% and it is selling at $1,136.16. The total value
The bond of Company ABC has 3 years to maturity. The bonds coupon rate is 10% and it is selling at $1,136.16. The total value of the bonds is $10M. The company also has preferred stocks, which are worth $10M. The preferred stock pays a dividend of $2 a share and currently sells at $20 a share. The common stocks of the company are worth $20M. The beta of the common stock is .8, the market return is 10%, the risk free rate is 6%, and the firms tax rate is 40%.
What is Company ABCs WACC?
What is the cost of preferred stock (RP) for ABC?
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