Given the following information for Notten Power Co., find the WACC. Assume the company tax rate is 21 percent. Debt: 25,500 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101.5 percent of par. The bonds make semiannual coupon payments. Floatation cost is 5% of current market price. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.30 per share dividends, sell for $98 per share with floatation cost of $5. Common stock: 100,000 shares outstanding, selling for $512 per share; the beta is 1.35. Market: 7 percent market risk premium and 4 percent risk-free rate.
Given the following information for Notten Power Co., find the WACC. Assume the company tax rate is 21 percent. Debt: 25,500 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101.5 percent of par. The bonds make semiannual coupon payments. Floatation cost is 5% of current market price. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.30 per share dividends, sell for $98 per share with floatation cost of $5. Common stock: 100,000 shares outstanding, selling for $512 per share; the beta is 1.35. Market: 7 percent market risk premium and 4 percent risk-free rate.
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 14P
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- Given the following information for Notten Power Co., find the WACC. Assume the company tax rate is 21 percent.
Debt: 25,500 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101.5 percent of par. The bonds make semiannual coupon payments. Floatation cost is 5% of current market price.
Common stock: 100,000 shares outstanding, selling for $512 per share; the beta is 1.35.
Market: 7 percent market risk premium and 4 percent risk-free rate.
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