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The companys tax rate is 30%. Common Stock: 20 million shares outstanding, selling for $4 per share; the beta is 1.05. Preferred Stock: 5 million
The companys tax rate is 30%.
Common Stock: 20 million shares outstanding, selling for $4 per share; the beta is 1.05.
Preferred Stock: 5 million shares outstanding, selling for $5 per share, pays $1 annually per share.
Debt: 1 million 6% quarterly coupon bonds outstanding, $100 face value, 20 years to maturity, selling at par.
Market: 7.5% market return and 4.5% risk-free rate.
a)Compute the cost of each security
b) Compute weight of each security
c) Compute WACC
Do not use Excel!
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