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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)?

Answer & Explanation Solved by verified expert
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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Transcribed Image Text

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)?

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