Stock $50 per share Beta 1.21 2 million shares outstanding Par value $1 Bonds 10

Question

Stock $50 per share Beta 1.21 2 million shares outstanding Par value $1 Bonds 10,000 outstanding Par value $1000 8% annual coupon (coupons paid semiannually) 22 years to maturity Market price: $1,101.23 Preferred Stock 150,000 shares outstanding Coupon payment of $10 Market price of $120 Par value $100 56. What is the weighted cost of equity? a. 10.45% b. 12.49% C. 14.35% d. 15.15% What is the after-tax weighted cost of debt? a. 0.23% b. 0.39% C. 0.51% d. 0.89% 58. What is the weighted cost of preferred stock? a. 1.16% b. 2.34% C. 3.51% d. 3.79% 59. What is the WACC? a. 10.12% b. 12.41% C. 14.17% d. 15.73%

Explanation / Answer

56) Cost of equity = 4.5% + 1.21*9.6% = 16.12%

Weighted cost of equity = 16.12% * .7751 = 12.49%

Working: Weight = 100 / (100 + 11.0123+18) = .7751

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