Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following

Question:

Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation.

Debt: One thousand bonds were issued five years ago at a coupon rate of 11%.

They had 20-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 37%.

Preferred stock: Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They're now selling to yield 11%.

Equity: Great Corp has 108,000 shares of common stock outstanding, currently selling at $18.48 per share.

Use the risk premium approach and assume a 3% risk premium.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...