Testing Company, Inc. has the following combination of Debt and Equity: Common Stock: 15.5 million shares outstanding Par value...

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Finance

Testing Company, Inc. has the following combination of Debt andEquity:

Common Stock:
15.5 million shares outstanding
Par value of $5/share
Book value of $20/share
Current price on the market of $65.25
Current Beta per a reliable source 1.13

Debt:
Maturity value of $500,000,000
Current price on the market of 97.3
Coupon rate if 4%
Semiannual payments
10 years until maturity

Other information:
Treasury bill rates — 2.45%
Market premium on this type of stock — 7.1%
Tax rate — 21%

What is the company’s weighted average cost of capital(WACC)?

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3.6 Ratings (544 Votes)

MV of equityPrice of equitynumber of shares outstanding MV of equity652515500000 1011375000 MV of BondPar valuebonds outstandingage of par MV of Bond10005000000973 See Answer

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Testing Company, Inc. has the following combination of Debt andEquity:Common Stock:15.5 million shares outstandingPar value of $5/shareBook value of $20/shareCurrent price on the market of $65.25Current Beta per a reliable source 1.13Debt:Maturity value of $500,000,000Current price on the market of 97.3Coupon rate if 4%Semiannual payments10 years until maturityOther information:Treasury bill rates — 2.45%Market premium on this type of stock — 7.1%Tax rate — 21%What is the company’s weighted average cost of capital(WACC)?