Consider the data on the following data; calculate the individual costs for each security and the weighted

Question:

Consider the data on the following data; calculate the individual costs for each security and the weighted average cost of capital (WACC). Then comment on your findings.

Percent of capital structure:

Debt ..................................................................30%

Preferred stock ....................................................15

Common equity ...................................................55

Additional information:

Bond coupon rate ...............................................13%

Bond yield to maturity .......................................11%

Dividend, expected common ............................$3.00

Dividend, preferred .........................................$10.00

Price, common .................................................$50.00

Price, preferred ................................................$98.00

Flotation cost, preferred ....................................$5.50

Growth rate ...........................................................8%

Corporate tax rate ...............................................30%

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... 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... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...