Weighted Average Cost of Capital $[$WACC$\}$

Questions $20$ through $26$ refer to the following date for Roadrunner Enterprises.

This same information will apply for Questions $20-27$:

Use the information below to calculate the Weighted Average Cost of Capital $[$WACC$]$ for Roadrunner Enterprises.

The company has the following components of its capital structure:

DEBT: $22,750$ bonds outstanding with a $6\mathrm{.}5\%$ coupon rate, paid annually.

Each bond has $$1,000$ par value with a $30-$year stated maturity,

and were issued five years ago.

The bonds currently sell for $85\%$ of par in the market.

PREFERRED STOCK:

There are $29,400$ shares of preferred stock outstanding.

The shares sell for $$82\mathrm{.}31$ in the market.

They pay an annual cash dividend of $$8\mathrm{.}85$ per share.

COMMON STOCK:

There are $355,000$ shares of common stock outstanding.

The shares sell for $$83\mathrm{.}25$ in the market and pay an annual cash dividend of $$2\mathrm{.}35$ per share.

The stock has a beta of $1\mathrm{.}53.$

$>>>$

The company has a corporate tax rate of $30\%.$

The expected return of the $$Market$$; that is$,$ the S&P$500$ is $10\mathrm{.}12\%$ per year.

T$-$bills are expected to return $3\mathrm{.}58\%$ per year.

$>>>$

Q$20$: What's the weight of debt in the capital structure?

Group of answer choices

$30\%$ to $40\%$

$80\%$ to $90\%$

$40\%$ to $50\%$

$60\%$ to $70\%$

$70$ to $80\%$

$10\%$ to $20\%$

$0\%$ to $10\%$

$50\%$ to $60\%$

$90\%$ to $100\%$

$20\%$ to $30\%$