Question
You are given the following information concerning Parrothead Enterprises: Debt 8,900 7.0 percent coupon bonds outstanding, with 25 years to maturity and a quoted price
You are given the following information concerning Parrothead Enterprises: Debt 8,900 7.0 percent coupon bonds outstanding, with 25 years to maturity and a quoted price of 107.75. These bonds have a par value of $2,000 and pay interest semiannually. Common stock: 300,000 shares of common stock selling for $66.00 per share. The stock has a beta of 1.05 and will pay a dividend of $4.20 next year. The dividend is expected to grow by 5.0 percent per year indefinitely. Preferred stock: 9,500 shares of 4.50 percent preferred stock selling at $95.50 per share. Market: 10.5 percent expected return, a risk-free rate of 4.35 percent, and a 25 percent tax rate.
What is the firm's cost of each form of financing?
Aftertax cost of debt?
cost of preferred stock?
cost of equity?
Calculate the WACC for the company.
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