Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long-term capital. Continue with the values and assumptions outlined
You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long-term capital. Continue with the values and assumptions outlined above. The companys marginal tax rate is 28%. First, there are 6,500,000 shares of common stock, which are currently selling for $153.12. You estimate that the Beta of the firms stock is 1.20 and that the long-term return on the stock market will be 9%. The current yield on Treasury Bills is 3.50%. 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% These bonds are currently trading for $1,182.10. What is the firms 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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started