Total 18 points] The Smith Company has 10,000 bonds outstanding. The bonds are selling at 109% of face value, have a 7% coupon rate, pay interest semi-annually, and mature in 10 years. There are 500,000 shares of 8% preferred stock outstanding with a current market price of $91 a share. In addition, there are 1.25 million shares of common stock outstanding with a market price of $63 a share and a beta of 0.97. The common stock paid a total of $1.20 in dividends last year and expects to increase those dividends by 3% annually. The firm's marginal tax rate is 35%. The overall stock market is yielding 11% and the Treasury bill rate is 3.5%.

e) What is the total market value of the Smith Company? (3 points)

f) What is the firms WACC? (3 points) Expert Answer