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The Walsh Company needs to compute its Weighted Average Cost of Capital (WACC) for the years ahead based on current market values. The Company is
The Walsh Company needs to compute its Weighted Average Cost of Capital (WACC) for the years ahead based on current market values. The Company is in the 40% tax bracket and Alex, the owner, has developed the following information about the Company's financial structure: Debt: The Company has current long-term bank loans outstanding of $796,000 with an average current interest rate of 6.75%. Preferred Stock: The Company has 20,000 shares of preferred stock at a par value of $10 per share and pays a 75 cent dividend on each share each year. The current market value of the stock is $172,000. Common Stock: The Company has 50,000 shares of common stock which currently sell for $16.64 per share. The stock's last dividend was $1.00 and the dividend has been growing at 4% per year and is expected to continue to do so for the foreseeable future. What is the after-tax cost of debt? (Round to the nearest xx.xxx% What is the after-tax cost of preferred stock? (Round to the nearest xx.xxx%) What is the after-tax cost of common stock? (Round to the nearest xx.xxx%) Based on current market values, what is the weighted cost of capital for the Company? (Round to the nearest xx.xxx%)
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