For the Bilbo corporation below: Debt: 10,000, 5% coupon bonds outstanding, priced at 100% of par value
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Question:
For the Bilbo corporation below:
- Debt: 10,000, 5% coupon bonds outstanding, priced at 100% of par value $100, with 15 years to maturity. These bonds pay interest annually.
- Preferred Stock: 50,000 shares of preferred stock with a dividend of $5.6 per share. It is currently selling at $80 per share.
- Common Stock: 200,000 shares common stock selling for $50 per share. The stock has a beta of 1.1
- Market: The expected return on the market is 8%, and the risk-free rate of return is 3%.
- Tax bracket = 20%
What is the before tax WACC of this company?
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