5. The following information is available concerning a firm's capital: Debt: Five thousand bonds with...
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5. The following information is available concerning a firm's capital: Debt: Five thousand bonds with a face value of $1000 and an initial 20-year term were issued five years ago with a coupon rate of 8%. Today these bonds are selling for $846.30. Preferred stock. Twenty thousand shares of preferred stock paying an annual dividend of $9.50 are outstanding. The shares currently trade at $79.16. Common equity: Two hundred thousand shares of common stock are outstanding which are now selling for $22.50 per share. An annual dividend of $1.70 was just paid and is expected to grow indefinitely at 6% Target capital structure: The firm's target capital structure is of 30% debt, 20% preferred stock, and 50% equity The firm can issue any type of security without paying floatation costs. The combined federal and state tax rate is 40% Calculate the firm's WACC based on its a. Target capital structure and market returns
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