The Kapple Inc. has 300000 bonds outstanding (nominal value per bond $1000) that are selling...
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The Kapple Inc. has 300000 bonds outstanding (nominal value per bond $1000) that are selling at a current market price of 93%. The bonds are yielding 7%. The company also has 1 million shares of preferred stock outstanding currently yielding 13%. Finally, Kapple Inc has also 3 million shares of common stock outstanding. The preferred stock sells for $45 per share and the common stock sells for $32 per share. The expected return on the common stock is 18%. The corporate tax rate is 34%. What is Kapple Inc.s weighted average cost of capital? In addition, is your calculated WACC rather high or low ?
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