Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What is the firms weighted-average-cost-of-capital? last post was wrong looking for the correct answer. You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm,

image text in transcribed

What is the firms weighted-average-cost-of-capital?

last post was wrong looking for the correct answer.

You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of longterm capital. Continue with the values and assumptions outlined above. The company's marginal tax rate is 28%. First, there are 6,500,000 shares of common stock, which are currently selling for $153.12. Recently, the firm announced EPS of $12.64. You feel that it is reasonable to assume that earnings will grow at 1.65% into the future. Second, there are 6,000,000 shares of preferred stock outstanding that pay a perpetual (annual) dividend of $3.85, and are currently selling for $52.04. Third, there is an issue of 460,000 coupon bonds with a face value of $1,000, which pays 6.35% (annual) coupons, and mature in twenty-three years. These bonds are currently trading for $1,182.10. What is the firm's weighted-average-cost-of-capital? (The answer is a percent, round your answer to two decimal places, e.g. 4.75)

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

Public Finance

Authors: Steven G. Medema, Carl Sumner Shoup

1st Edition

0202307859, 978-0202307855

More Books

Students also viewed these Finance questions