Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The expected return on the market is 11.76%, the risk-free rate is 4.17, and the tax rate is 30%. XYZ has 800.000 common shares outstanding

image text in transcribed
The expected return on the market is 11.76%, the risk-free rate is 4.17, and the tax rate is 30%. XYZ has 800.000 common shares outstanding that are priced at $12.75 per share and have an expected return of 19.83% and an expected real return of 18.05%. Last year, XYZ common stock had a return of 14.994. The company also has 350,000 shares of preferred stock outstanding that are priced at $12,00 per share and have an expected return of 15.79 and an expected real return of 14.07. Last year, XYZ preferred stock had a return of B.88m. Finally, the company has 25.000 bonds outstanding with a coupon rate of 6.37. yield-to-maturity of 8.23%, current yield of 7.054, face value of $1,000, and price of 5904. What is the weighted average cost of capital for XYZ? a. 10.78 (plus or minus 0.05 percentage points) b. 10.09% (plus or minus 0.05 percentage points) c. 10.27% (plus or minus 0.05 percentage points) d. 9.98% (plus or minus 0.05 percentage points) e. None of the above is within 0.05 percentage points of the correct

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fiduciary Finance Investment Funds And The Crisis In Financial Markets

Authors: Martin Gold

1st Edition

1848448953, 9781848448957

More Books

Students also viewed these Finance questions

Question

Are the people who must perform the action identified by role?

Answered: 1 week ago

Question

Is there just cause to dismiss Bonita? Explain your answer.

Answered: 1 week ago

Question

Explain the legal term assumption of risk .

Answered: 1 week ago