Question
You are estimating the weighted average cost of capital (WACC) for your company based on the following information: Common stock: 40 million shares outstanding, $60
You are estimating the weighted average cost of capital (WACC) for your company based on the following information: Common stock: 40 million shares outstanding, $60 market price per share, common stock beta is 0.90, market return is 10.5%, and risk-free rate is 4.0%. Preferred stock: 10 million shares outstanding, $100 market price per share, quarterly dividend of $1.25. Debt information: $1.2 billion of debt at face value, quoted price of 90. There is one issue of bonds outstanding with 6% coupon rate, interest paid semi-annually, with 12 years to maturity. The companys marginal income tax rate is 30%. Calculate the following returns: (1/100 of one percent without % sign, e.g. 12.671, if a negative percentage, -9.56).
1. Cost of common share equity (%):
2. Cost of preferred share equity (%):
3. Cost of debt (%):
4. Proportion of common share equity (%):
5. Proportion of preferred share equity (%):
6. Proportion of long-term debt (%):
7. Weighted average cost of capital (%):
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