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Zeneda Inc. is estimating its WACC. You know the following information about the company's capital structure: Bonds (Bonds are the only debt) 10 years
Zeneda Inc. is estimating its WACC. You know the following information about the company's capital structure: Bonds (Bonds are the only debt) 10 years maturity - 7% coupon, semiannually payable Preferred shares - 150,000 shares are outstanding - Annual dividend of $6 per share Common stock - 500,000 shares outstanding Book Value (in million $) 40 15 25 Market Value (in million $) 43 Further information - Dividend yield on preferred shares = 5% p.a. Actual price per share = 78 Beta 1.3 Furthermore you know that the risk-free rate is 4% and the market risk premium is 6%. The company's marginal tax rate is 30%. Furthermore you know that the risk-free rate is 4% and the market risk premium is 6%. The company's marginal tax rate is 30%. 1. What is Zeneda's market value of preferred shares, expressed as a percentage of the total market value of (debt + preferred stock + common stock)? What is Zeneda's component cost of debt after taxes? What is Zeneda's component cost of common stock? What is Zeneda's WACC?
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