You are looking at the following information: Debt: 2,500 8.5 percent coupon bonds outstanding, $1,000 par value, 21...

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Finance

You are looking at the following information:

  Debt: 2,500 8.5 percent coupon bonds outstanding, $1,000 par value,21 years to maturity, selling for 104 percent of par; the bondsmake semiannual payments.
  Common stock: 62,500 shares outstanding, selling for $61 per share; the betais 1.1.
  Preferred stock: 8,000 shares of 7 percent preferred stock (review my Ch.8slide 43: what does "...% preferred stock" phrase mean?)outstanding, currently selling for $106 per share.
  Market: 10 percent market risk premium and 6.5 percent risk-freerate.

The company is in the 31 percent tax rate bracket based on itscorporate income.

Required:

Find the WACC. (Do not round your intermediatecalculations.)

rev: 09_20_2012
Multiple Choice
12.36%
11.96%
12.86%
12.13%
11.86%
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4.2 Ratings (493 Votes)

Debt Number of bonds outstanding 2500 Face Value 1000 Current Price 1041000 1040 Value of Debt 2500 1040 Value of Debt 2600000 Annual Coupon Rate 850 Semiannual Coupon Rate 425 Semiannual Coupon 4251000 4250 Time to Maturity 21 years Semiannual Period to Maturity 42 Let semiannual YTM be i 1040 4250 PVIFAi See Answer

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Transcribed Image Text

You are looking at the following information: Debt:2,500 8.5 percent coupon bonds outstanding, $1,000 par value,21 years to maturity, selling for 104 percent of par; the bondsmake semiannual payments. Common stock:62,500 shares outstanding, selling for $61 per share; the betais 1.1. Preferred stock:8,000 shares of 7 percent preferred stock (review my Ch.8slide 43: what does "...% preferred stock" phrase mean?)outstanding, currently selling for $106 per share. Market:10 percent market risk premium and 6.5 percent risk-freerate. The company is in the 31 percent tax rate bracket based on itscorporate income. Required: Find the WACC. (Do not round your intermediatecalculations.)rev: 09_20_2012Multiple Choice12.36%11.96%12.86%12.13%11.86%Next Visit question mapQuestion4of10Total4 of 10Prev


Debt:		2,500 8.5 percent coupon bonds outstanding, $1,000 par value,21 years to maturity, selling for 104 percent of par; the bondsmake semiannual payments.
Common stock:		62,500 shares outstanding, selling for $61 per share; the betais 1.1.
Preferred stock:		8,000 shares of 7 percent preferred stock (review my Ch.8slide 43: what does "...% preferred stock" phrase mean?)outstanding, currently selling for $106 per share.
Market:		10 percent market risk premium and 6.5 percent risk-freerate.