Retur 6 You are given the following information for Watson Power Co. Assume the

Question

Retur 6 You are given the following information for Watson Power Co. Assume the company's tax rate is 23 percent. 8.35 8,000 5.7 percent coupon bonds outstanding, $1,000 par value, 23 years to maturity, selling for 105 percent of par the bonds make semiannual payments. Debt Common si 410,000 shares outstanding, selling for $59 per share, the beta is 1.10. Preferred 00 shares of 3.5 percent preferred stock outstanding, currently stock: selling for $80 per share. The par value is $100 per share. Market 7 percent market risk premium and 4.5 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. WACC 6.35 ) %

Explanation / Answer

WACC = 9.88%

Amount weight cost weight*cost equity             24,190,000.00 0.7117 12.2000% 0.0868 debt               8,400,000.00 0.2471 4.0968% 0.0101 preferred shares               1,400,000.00 0.04119 4.3750% 0.0018

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