Zeneda Inc. is estimating its WACC. You know the following information about the company's capital...
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Zeneda Inc. is estimating its WACC. You know the following information about the company's capital structure: Further information Book Value (in million $) Market Value (in million $) 40 43 Bonds (Bonds are the only debt) 10 years maturity - 7% coupon, semiannually payable Preferred shares - 150,000 shares are outstanding - Annual dividend of $6 per share Common stock - 500,000 shares outstanding 15 Dividend yield on preferred shares = 5% p.a. 25 Actual price per share = - Beta = 1.3 78 Furthermore you know that the risk-free rate is 4% and the market risk premium is 6%. The company's marginal tax rate is 30%. Furthermore you know that the risk-free rate is 4% and the market risk premium is 6%. The company's marginal tax rate is 30%. 1. What is Zeneda's market value of preferred shares, expressed as a percentage of the total market value of (debt + preferred stock + common stock)? a. b. C. d. e. 15.0% 18.0% 22.5% 35.4% 39.0% 2. What is Zeneda's component cost of debt after taxes? a. b. 7.5% 6.0% 4.2% 3.6% 2.1% 3. What is Zeneda's component cost of common stock? a. b. C. d. e. 7.6% 10.0% 11.2% 11.8% 13.8% 4. What is Zeneda's WACC? a. b. C. d. e. 5.8% 6.6% 7.3% 7.6% 8.1%
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