The Cullumber Products Co. currently has debt with a market value of $225 million outstanding. The debt...

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TheCullumber Products Co. currently has debt with a market value of$225 million outstanding. The debt consists of 9 percent couponbonds (semiannual coupon payments) which have a maturity of 15years and are currently priced at $1,423.92 per bond. The firm alsohas an issue of 2 million preferred shares outstanding with amarket price of $13 per share. The preferred shares pay an annualdividend of $1.20. Cullumber also has 14 million shares of commonstock outstanding with a price of $20.00 per share. The firm isexpected to pay a $2.20 common dividend one year from today, andthat dividend is expected to increase by 4 percent per yearforever. If Cullumber is subject to a 40 percent marginal tax rate,then what is the firm’s weighted average cost of capital?

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Answer Cost of debt Price 142392 Semiannual coupon 1000 92 45 Time to maturity 15 2 30 semiannual periods Semiannual yield RATE nper pmt pv fv type RATE 30 45 See Answer

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TheCullumber Products Co. currently has debt with a market value of$225 million outstanding. The debt consists of 9 percent couponbonds (semiannual coupon payments) which have a maturity of 15years and are currently priced at $1,423.92 per bond. The firm alsohas an issue of 2 million preferred shares outstanding with amarket price of $13 per share. The preferred shares pay an annualdividend of $1.20. Cullumber also has 14 million shares of commonstock outstanding with a price of $20.00 per share. The firm isexpected to pay a $2.20 common dividend one year from today, andthat dividend is expected to increase by 4 percent per yearforever. If Cullumber is subject to a 40 percent marginal tax rate,then what is the firm’s weighted average cost of capital?