vero company currently has a capital structure made up of debt. preferred stock and common...
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vero company currently has a capital structure made up of debt. preferred stock and common stock. They are in the process of issuing more common stock and selling more honds. Bond is an existing bond that is calling for $940 and has a $1.000 par. 5.5% rate and 12 years to maturity. Float costs are 2% of the market price new bonds. It will pay interest on an annual basis htly selling for $945 and has a $1,000 par, 5.0% rate and 20 years to maturity. Float costs are 2% of the market price new bonds. It pays interest on an annual basis. Preferred stock is new and selling for $102 per share, with a $100 par value and an 8% dividend rate. Float cost are 1.5% of the market price with new issues. Common stock is currently selling for $50 and will pay an expected dividend of $1.05. Investors expect a 9% growth rate on this stock. The new stock has a 2.5% float cost associated with it. Determine the weighted average cost of capital for the Nero Company using the chart below and the above/below information. Nero has a 35% tax rate and the following market values per each security: AT Cost % WACC Bond #1 Bond #2 Preferred Stock Existing Common Stock New Common Stock $12,000,000 18,000,000 10,000,000 49,000,000 11,000,000
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