Question
The book value of Aloha Airlines debt is $42 million but is currently trading for 95% of book value, has a coupon rate of 6%
The book value of Aloha Airlines debt is $42 million but is currently trading for 95% of book value, has a coupon rate of 6% and priced to yield 4.8%. The 2,600,000 shares of stock are currently trading at $11.65 per share. The risk-free rate is 1.7%, the expected return to the market portfolio is 9%, and the beta for the firm is 1.8. There are 600,000 shares of preferred stock priced at $30 per share. Preferred Stock dividends are $2/share. The average tax rate is 30% and the marginal rate is 25%. What is the weighted average cost of capital (WACC)?
| A) WACC = 9.822% | |
|
| B) WACC = 8.09% |
|
| C) WACC = 9.526% |
|
| D) WACC = 8.3% |
|
| E) WACC = 7.45% |
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
