Tirana Manufacturing Company has 9 million shares of common stock outstanding, 250,000 shares of 6...
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Tirana Manufacturing Company has 9 million shares of common stock outstanding, 250,000 shares of 6 percent preferred stock outstanding, and 105,000 7.5 percent bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 93 percent of par. (Hence the market value of bonds will be face value x 93 percent x no of bonds). The market risk premium is 8.5 percent, T-bills (risk-free rate) are yielding 5 percent, and Tirana Manufacturings tax rate is 35 percent. a) What is the firms market value capital structure? b) Compute the WACC of Tirana Manufacturing?
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