Given the following information for Michigan Corp. Find the WACC. Assume the tax rate is 35%,...

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Given the following information for Michigan Corp. Find theWACC. Assume the tax rate is 35%, bonds are 10,000, 7% coupon bondsoutstanding at 1000 parr value with ten years until maturityselling at 105% of the parr, the bond makes semi annual payments.Common shares are 400,000, shares outstanding are selling for $50 ashare.
The Beta is 1.15, preferred shares 25,000, shares of 5%preferred stocks outstanding currently selling for $65 a share.Parr value of the preferred is 100, 12% is the expected return ofthe market and 4 % is the risk free rate.
Assume no floatation cost.

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3.7 Ratings (369 Votes)

Debt Number of Bonds 10000 Coupon Rate 7 payable semiannually Tenure 10 years or 10 x 2 20 halfyears Par Value 1000 Selling Price 105 of Par Value 105 x 1000 1050 Let the yield to maturity be 2r SemiAnnual See Answer

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Given the following information for Michigan Corp. Find theWACC. Assume the tax rate is 35%, bonds are 10,000, 7% coupon bondsoutstanding at 1000 parr value with ten years until maturityselling at 105% of the parr, the bond makes semi annual payments.Common shares are 400,000, shares outstanding are selling for $50 ashare.The Beta is 1.15, preferred shares 25,000, shares of 5%preferred stocks outstanding currently selling for $65 a share.Parr value of the preferred is 100, 12% is the expected return ofthe market and 4 % is the risk free rate.Assume no floatation cost.