Given the following information for Watson Power Co., find the WACC. Assume the company tax rate is 20 percent. Debt: 9,000 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101 percent of par (meaning its current price is $1,010). The bonds make semiannual coupon payments. Floatation cost is $9. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.3 per share dividends, sell for $98 per share with floatation cost of $2. Common stock: 732,000 shares outstanding, selling for $86 per share; beta is 1.08. Market: 7 percent market risk premium and 2 percent risk-free rate.|

Given the following information for Watson Power Co., find the WACC. Assume the company tax rate is 20 percent. Debt: 9,000 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101 percent of par (meaning its current price is $1,010). The bonds make semiannual coupon payments. Floatation cost is $9. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.3 per share dividends, sell for $98 per share with floatation cost of $2. Common stock: 732,000 shares outstanding, selling for $86 per share; beta is 1.08. Market: 7 percent market risk premium and 2 percent risk-free rate.|

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

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