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

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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 ?

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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

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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 ?