13) (14 pts) Given financed with debt, preferred stock and common percentage of

Question

13) (14 pts) Given financed with debt, preferred stock and common percentage of assets rate for Company Z is 30% 5,000 Bond Debt s outstanding with a 5% coupon, S1,000 par value, 18 years to maturity the bonds make semiannual coupon payments 170,000 shares stock has a beta of 1.2. The risk free rate is 1.7% and the market risk premium Common stock: outstanding, selling for $80.5 per share: The companvý's common Preferred stock: 45,000 shares of 5.75 percent preferred stock outstanding currently selling for $94 per share. a) What is the market value of the assets for company za Market Value of Assets-$ b) What percentage of the assets is financed with debta %Debt : c) What percentage of the assets is financed with common stock? % Common Stock- d) What percentage of the assets is financed with preferred stock? % Preferred Stock Before tax cost of debt e) What is the before tax cost of debt? f) What is the cost of preferred stock? 8) What is the cost of common stock (Equity) h) What is the WACC for Company Z Cost of Preferred Stock Cost of Common Stock

Explanation / Answer

h )

e) 5% f) 5.75% g) Cost of Common stock =Risk free rate + Market Risk premium * Beta Cost of Common stock =1.7% + 7.5% *1.2 10.70%

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