You are given the following information concerning Parrothead Enterprises: Debt: 9,700 7.2 percent coupon bonds outstanding, with 23...

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Finance

You are given the following information concerning ParrotheadEnterprises:
Debt:
9,700 7.2 percent coupon bonds outstanding, with 23 years tomaturity and a quoted price of 105.75. These bonds pay interestsemiannually.
Common stock:
260,000 shares of common stock selling for $65.20 per share. Thestock has a beta of .92 and will pay a dividend of $3.40 next year.The dividend is expected to grow by 5.2 percent per yearindefinitely.
Preferred stock: 8,700 shares of 4.60 percent preferred stock selling at $94.70per share.
Market: An expected return of 11.3 percent, a risk-free rate of 5.10percent, and a 30 percent tax rate.

What is the firm's cost of each form of financing? (Do notround intermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)
Aftertax cost of debt ___%
Cost of preferred stock _%
Cost of equity _%

Calculate the WACC for the company. (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

WACC ____ %

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3.8 Ratings (396 Votes)

Debt Number of bonds outstanding 9700 Face Value 1000 Current Price 10575 1000 Current Price 105750 Value of Debt 9700 105750 Value of Debt 10257750 Annual Coupon Rate 720 Semiannual Coupon Rate 360 Semiannual Coupon 360 1000 Semiannual Coupon 36 Time to Maturity 23 years Semiannual Period to Maturity 46 Let semiannual YTM be i 105750 36 PVIFAi 46 1000 PVIFi See Answer

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You are given the following information concerning ParrotheadEnterprises:Debt:9,700 7.2 percent coupon bonds outstanding, with 23 years tomaturity and a quoted price of 105.75. These bonds pay interestsemiannually.Common stock:260,000 shares of common stock selling for $65.20 per share. Thestock has a beta of .92 and will pay a dividend of $3.40 next year.The dividend is expected to grow by 5.2 percent per yearindefinitely.Preferred stock:8,700 shares of 4.60 percent preferred stock selling at $94.70per share.Market:An expected return of 11.3 percent, a risk-free rate of 5.10percent, and a 30 percent tax rate.What is the firm's cost of each form of financing? (Do notround intermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)Aftertax cost of debt_____%Cost of preferred stock_____%Cost of equity_____%Calculate the WACC for the company. (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)WACC ______ %

Debt:		9,700 7.2 percent coupon bonds outstanding, with 23 years tomaturity and a quoted price of 105.75. These bonds pay interestsemiannually.

Common stock:		260,000 shares of common stock selling for $65.20 per share. Thestock has a beta of .92 and will pay a dividend of $3.40 next year.The dividend is expected to grow by 5.2 percent per yearindefinitely.

Preferred stock:		8,700 shares of 4.60 percent preferred stock selling at $94.70per share.

Market:		An expected return of 11.3 percent, a risk-free rate of 5.10percent, and a 30 percent tax rate.


Aftertax cost of debt	_____%
Cost of preferred stock	_____%
Cost of equity	_____%