Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of

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Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 8%, paid annually. Today, the debt is selling at $1,050. The firm's tax bracket is 35%. Micro Spinoffs also has preferred stock outstanding. The stock pays a dividend of $4 per share, and the stock sells for $40. Suppose Micro Spinoffs' cost of equity is 12%. What is its WACC if equity is 50%, preferred stock is 20%, and debt is 30% of total capital?

Micro Spinoffs, Inc., issued 20-year debt a year ago at
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Fundamentals of Corporate Finance

ISBN: 978-0078034640

7th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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