medicom co. has 6,500 bonds outstanding that are selling at 96.5% of par, paying semiannual coupon...

90.2K

Verified Solution

Question

Finance

medicom co. has 6,500 bonds outstanding that are selling at96.5% of par, paying semiannual coupon of 4.8% with 2 yearsremaining to maturity. the company also have 48,000 shares of 5.5%preferred stock at 75,000 shares of common stock outstanding .thepreferred stock sells for $64 a share. the common stock has a betaof 1.32 and sells for $41 a share.the preferred stock has a statedvalue of $100. the risk free rate is 2.2% and the market riskpremium is 8.4%. the corporate tax rate is 21 percent. a. what isthe weighted average cost of capital ?

Answer & Explanation Solved by verified expert

4.4 Ratings (889 Votes)

1 Cost of debt Current price 965par value 9651000 965 Semiannual coupon 482par value 24 Number of payments to be made 22 4 YTM calculation PV 965 FV 1000 PMT 24 N 4 CPT RATE Rate or semiannual YTM 335 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

medicom co. has 6,500 bonds outstanding that are selling at96.5% of par, paying semiannual coupon of 4.8% with 2 yearsremaining to maturity. the company also have 48,000 shares of 5.5%preferred stock at 75,000 shares of common stock outstanding .thepreferred stock sells for $64 a share. the common stock has a betaof 1.32 and sells for $41 a share.the preferred stock has a statedvalue of $100. the risk free rate is 2.2% and the market riskpremium is 8.4%. the corporate tax rate is 21 percent. a. what isthe weighted average cost of capital ?