The WACC of the company. Introduction : The WACC (Weighted Average Cost of Capital) is the total rate of return for a company which anticipates reimbursing all their investors. It is considered as a financing resource in the target capital structure of a company and it measured in terms of weights of fractions.

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You are looking at the following information: Debt: Common stock: Preferred stock: Market: 5,000 8.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. 110,000 shares outstanding, selling for $62 per share; the beta is 1.2. 16,000 shares of 7.5 percent preferred stock (review my Ch.8 slide 43: what does ...% preferred stock" phrase mean?) outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7.5 percent risk-free rate. The company is in the 33 percent tax rate bracket based on its corporate income. Required: Find the WACC. (Do not round your intermediate calculations.)

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Chapter 13, Problem 17QP

Summary Introduction

To determine: The WACC of the company.

Introduction: The WACC (Weighted Average Cost of Capital) is the total rate of return for a company which anticipates reimbursing all their investors. It is considered as a financing resource in the target capital structure of a company and it measured in terms of weights of fractions.

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You are looking at the following information: Debt: Common stock: Preferred stock: Market: 5,000 8.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. 110,000 shares outstanding, selling for $62 per share; the beta is 1.2. 16,000 shares of 7.5 percent preferred stock (review my Ch.8 slide 43: what does ...% preferred stock" phrase mean?) outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7.5 percent risk-free rate. The company is in the 33 percent tax rate bracket based on its corporate income. Required: Find the WACC. (Do not round your intermediate calculations.)

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17. Preferred Stock and WACC The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a coupon rate of 4.9 percent and a current price quote of 106.5; the bonds have 15 years to maturity and a par value of $1,000. 40,000 zero coupon bonds with a price quote of 21.8, 30 years until maturity, and a par value of $10,000. Both bonds have semiannual compunding. 135,000 shares of 3.5 percent preferred stock with a current price of $87 and a par value of $100. 1,900,000 shares of common stock; the current price is $73 and the beta of the stock is 1.15. The corporate tax rate is 23 percent, the market risk premium is 7 percent, and the risk-free rate is 3.6 percent. Preferred stock: Common stock: Market: