What is the capital structure of this company based on market values?Bond issue #1, maturity 12 years, coupon rate 9%, current YTM 9.75%, book value $10 millionBond issue #2, maturity 16 years, coupon rate 9%, current YTM 7.75%, book value $15 millionPreferred stock, 500,000 shares, par $10 per shareCommon stock, par $1 per share, book value $10 millionMarket price of preferred stock is $17.50, market price of common stock is $15What is the WACC if:Tax rate = 40%Preferred stock dividend = $1.50 per shareCommon stock dividend = $.375 per shareBeta is 1.15RFR = 5.21%Expected return of the market = 14%

The Capital Structure consists of different sources of funds that are mainly used for financing the…

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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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What is the capital structure of this company based on market values?

Bond issue #1, maturity 12 years, coupon rate 9%, current YTM 9.75%, book value $10 million
Bond issue #2, maturity 16 years, coupon rate 9%, current YTM 7.75%, book value $15 million
Preferred stock, 500,000 shares, par $10 per share
Common stock, par $1 per share, book value $10 million
Market price of preferred stock is $17.50, market price of common stock is $15

What is the WACC if:

Tax rate = 40%
Preferred stock dividend = $1.50 per share
Common stock dividend = $.375 per share
Beta is 1.15
RFR = 5.21%
Expected return of the market = 14%

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