AA corporation has a capital structure consisting of 40% debt, 10% preferred stock, and 50% common...

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AA corporation has a capital structure consisting of 40% debt,10% preferred stock, and 50% common equity. Assume the firm has asufficient retained earnings to fund the equity portion of itscapital budget. It has 20-year, 14% semiannual coupon bonds thatsell at their par value of $1,000. The firm could sell, at par, $50preferred stock that pays a 8% annual dividend. AA’s beta is 1.4,the risk-free rate if 5%, and the market risk premium is 8%. AA isa constant growth firm that just paid dividend of $1.00, sells for$20.00 per share, and has a growth rate of 10%. AA’s tax rate is30%. what is AA’s WACC?
i need specific calculation process for this question, not onlythe answer!!

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3.9 Ratings (711 Votes)

Cost of Debt Bond Tenure 20 years Coupon Rate 14 payable semiannuallyPar Value 1000 Market Price Par Value 1000 As the bond sells at par the bonds annual coupon rate should equal See Answer

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AA corporation has a capital structure consisting of 40% debt,10% preferred stock, and 50% common equity. Assume the firm has asufficient retained earnings to fund the equity portion of itscapital budget. It has 20-year, 14% semiannual coupon bonds thatsell at their par value of $1,000. The firm could sell, at par, $50preferred stock that pays a 8% annual dividend. AA’s beta is 1.4,the risk-free rate if 5%, and the market risk premium is 8%. AA isa constant growth firm that just paid dividend of $1.00, sells for$20.00 per share, and has a growth rate of 10%. AA’s tax rate is30%. what is AA’s WACC?i need specific calculation process for this question, not onlythe answer!!