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Debt – 7,000 6 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity selling...

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Finance

Debt – 7,000 6 percent coupon bonds outstanding, $1,000 parvalue, 25 years to maturity selling for 106 percent of par; thebonds make semi-annual payments

Preferred shares – 15,000 shares paying a dividend of $3.65 perpreferred shares outstanding currently selling at $72 per share

Common shares - 300,000 common shares outstanding, selling at$55 per share.

Corporate Tax Rate: 35%

Year

Risk free rate (Rf)

Return from the market (Rm)

Beta

2016

1.81

12.3

1.20

2015

1.75

15.5

1.5

2014

1.70

35.2

1.42

2013

1.80

(33.1)

1.33

2012

1.92

9.83

1.4

2011

1.87

17.2

1.5

2010

1.88

24.1

1.45

2009

1.90

14.5

1.2

2008

1.85

(10.2)

1.6

2007

1.77

8.3

1.25

- Calculate the average Risk free rate (Rf), Returnfrom the market (Rm) and beta (?) from data collected inthe last ten years in Table 1.

- Calculate the market value of each component of the capitalstructure of the company.

-Calculate the cost of debt, cost of preferred shares and costof common shares. Note: Use CAPM for the cost of common sharesusing your averages for Rf, Rm and Beta

-Calculate the weighted average cost of capital

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