Given the following, find the WACC assuming the tax rate is 30%.Debt: 3,500 bonds outstanding with 7.20% p.a. coupons paid semi-annually, $1000 face value, 25 years to maturity, current market yield is 5.72% p.a.Ordinary shares: 175,000 shares outstanding selling for $37 per share with beta of 1.15.Preference shares: pay a dividend of 8% p.a. forever on a $15 face value, 45,000 outstanding, currently selling for $14.20 per share.Other information: Market risk premium = 7%, risk-free rate = 3.1% p.a. Calculate the WACC. SourceMarket ValueWeightCost of CapitalWACC Component

The weighted average cost of capital (WACC) is the expected rate of return that is expected from a…

Answered: Given the following, find the WACC…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 2P

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Given the following, find the WACC assuming the tax rate is 30%.

Debt: 3,500 bonds outstanding with 7.20% p.a. coupons paid semi-annually, $1000 face value, 25 years to maturity, current market yield is 5.72% p.a.
Ordinary shares: 175,000 shares outstanding selling for $37 per share with beta of 1.15.
Preference shares: pay a dividend of 8% p.a. forever on a $15 face value, 45,000 outstanding, currently selling for $14.20 per share.

Other information: Market risk premium = 7%, risk-free rate = 3.1% p.a.

Calculate the WACC.

Source	Market Value	Weight	Cost of Capital	WACC Component

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