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

70.2K

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

4.3 Ratings (927 Votes)

a Cost of bond YTM after tax YTM Coupon F Pn F P 2 Here F Face value 100 P Price 9650 100 9650 Coupon Face value Coupon rate Coupon 100 48 612 months Coupon 24 n period 2 years 2 4 Tax rate 21 or 021 YTM calculation YTM 24 100 9650 4 100 96502 YTM 24 0875 9825 YTM 3275 9825 YTM semi annually 00333 Now YTM annually 1 YTM 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: Zin 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 ?

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

70.2K

Verified Solution

Question

Finance

Answer & Explanation Solved by verified expert

Get Answers to Unlimited Questions

Membership Benefits:

Transcribed Image Text

Other questions asked by students

An aluminum rod is subject to electrolysis in an aqueous solution resulting in the production of...

Describe the relationship between exercise intensity and fuel selection. Make sure to use RER as a...

List positive and negative effectors for oxygen binding to hemoglobin. explain cooperative binding using hemoglobin as an example. Correlate...

Suppose a sinusoidal wave on a string, having amplitude A and travelling in the âˆ’xË† direction,...

Two lenses are separated by L = 50.0 cm. The first lens (light coming from the...

Select the statement that correctly describes the end behavior of f(x) = 8 - 2x...

Section 1 Arithmetic Question 12 15 of what number is equal to 90 A 8...

Find the exact value of the real number y y sin 1 O2TL 07 3

Write an equation any form for the quadratic graphed below Ve 5 4 3 2...

A doctor prescribes 26 milligrams of a therapeutic drug that is absorbed by the body...

Suppose you are the money manager of a $4.37 million investment fund. The fund consists...

Gladstone Limited tracks the number of units purchased and sold throughout each accounting period but...