Calculate the WACC for the following. Assume the tax rate to be 21%.Debt: 16,000 6.2% coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108% of par; the bonds make semiannual paymentsCommon stock: 535,000 shares outstanding, selling for $81 per share; beta is 1.2.Preferred stock: 20,000 shares of 4.2% preferred stock outstanding, currently selling for $92 per share. Par value is $100.Market: 7% market risk premium and 3.1% risk free rate

The computation as follows: Hence, the WACC is 9.66%.

Answered: Calculate the WACC for the following.…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 10P

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Calculate the WACC for the following. Assume the tax rate to be 21%.

Debt: 16,000 6.2% coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108% of par; the bonds make semiannual payments
Common stock: 535,000 shares outstanding, selling for $81 per share; beta is 1.2.
Preferred stock: 20,000 shares of 4.2% preferred stock outstanding, currently selling for $92 per share. Par value is $100.
Market: 7% market risk premium and 3.1% risk free rate

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