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Debt: 5,500 7.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for...

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Finance

Debt: 5,500 7.5 percent coupon bonds outstanding, $1,000 parvalue, 21 years to maturity, selling for 105 percent of par; thebonds make semiannual payments. Common stock: 132,000 sharesoutstanding, selling for $57 per share; the beta is 1.11. Preferredstock: 18,000 shares of 6.5 percent preferred stock outstanding,currently selling for $106 per share. Market: 8.5 percent marketrisk premium and 6 percent risk-free rate. Assume the company's taxrate is 31 percent. What is the WAAC?

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4.1 Ratings (563 Votes)
Firms Market Value Capital Structure Capital Calculation Market Value Capital Structure Weights Debt 5775000 15207000 03798 Preferred Stock 1908000 15207000 01254 Equity 7524000 15207000 04948 Market Value of each capital Structure Debt 577500 5500 x 1000 x 105 Preferred Stock 1908000 18000 x 106 Equity 7524000 132000 x 57    See Answer
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Debt: 5,500 7.5 percent coupon bonds outstanding, $1,000 parvalue, 21 years to maturity, selling for 105 percent of par; thebonds make semiannual payments. Common stock: 132,000 sharesoutstanding, selling for $57 per share; the beta is 1.11. Preferredstock: 18,000 shares of 6.5 percent preferred stock outstanding,currently selling for $106 per share. Market: 8.5 percent marketrisk premium and 6 percent risk-free rate. Assume the company's taxrate is 31 percent. What is the WAAC?

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