Consider the following information for Evenflow Power Co., Debt: 2,500 bonds that each year pay 8...

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Finance

Consider the following information for Evenflow Power Co.,
Debt: 2,500 bonds that each year pay 8 percent of par value asan annual coupon, have a $1,000 par value, and a yield to maturityof 7.59 percent compounded annually. The bonds have 18yrs tomaturity and currently sell for 104 percent of par (face)value.
Common stock: 62,500 shares outstanding, selling for $57 pershare; the beta is 1.1.
Preferred stock: 9,000 preferred shares that pay a dividend of 7percent annually on $100 par value and currently sell for $105 pershare.
Market: 9 percent market risk premium and 7 percent risk-freerate.
Assume the company's tax rate is 32 percent.
Required: Find the WACC. (Do not round yourintermediate calculations.)

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4.5 Ratings (683 Votes)

Market Value of Debt Par Value x 104 x No of bonds 1000 x 104 x 2500 2600000 Market Value of Common Stock Selling Price x No of Shares 57 x 62500 3562500 Market Value of Preferred Stock See Answer

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Consider the following information for Evenflow Power Co.,Debt: 2,500 bonds that each year pay 8 percent of par value asan annual coupon, have a $1,000 par value, and a yield to maturityof 7.59 percent compounded annually. The bonds have 18yrs tomaturity and currently sell for 104 percent of par (face)value.Common stock: 62,500 shares outstanding, selling for $57 pershare; the beta is 1.1.Preferred stock: 9,000 preferred shares that pay a dividend of 7percent annually on $100 par value and currently sell for $105 pershare.Market: 9 percent market risk premium and 7 percent risk-freerate.Assume the company's tax rate is 32 percent.Required: Find the WACC. (Do not round yourintermediate calculations.)