Given the following information about Lingenburger Co., Find the WACC, here are the facts; - marginal tax
Question:
Given the following information about Lingenburger Co., Find the WACC, here are the facts;
- marginal tax rate = 0.30
- 8% semiannual bands trading at $748.99 with 12yrs. left until maturity
- 10% preferred (annual) stack with 100 par value a trading at $80
- Last dividend paid was $7.62
- Market risk premium = 5%
- Current t bill yield is 4%
- Beta = 2.2
- Growth rate in dividends is expected to be 5% indefinitely
- $1 million in retained earnings account
- Optimal Capital Structure; 40%(debt)/ 10%(preferred stock)/50% (equity)
- If issuing new common stock, will face flotation costs of 15%
- Occasionally use the bond yield plus premium approach, risk premium in this case is 2.64%
Find cost debt, cost of preferred stock, and WACC.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill