Assume the market value of Fords' common stock equity is $60 per share, preferred stock equity...

 

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Assume the market value of Fords' common stock equity is $60 per share, preferred stock equity is $40 per share and the current yield on their debt is 8%. Ford has a beta of 1.7, the market return is 11%, and the risk-free rate of interest is 3%. Ford's preferred stock pays a dividend of $5 each year. Ford's debt pays a coupon rate of 7% and has 15 years until maturity (assume each bond has a face value of $1000). What is Ford's weighted average cost of capital if its tax rate is 30%? Cash Current Assets $350,000 $1,000,000 Current Liabilities $50,000 Long-Term Debt $14,000,000 Total Liabilities $14,050,000 Preferred Stock ($10 par) $500,000 Long-Term Assets $16,150,000 Common Stock ($.10 par) $10,000 Retained Earnings $2,940,000 Total Common Equity $2,950,000 Total Liabilities and Total Assets $17,500,000 $17,500,000 Equity Assume the market value of Fords' common stock equity is $60 per share, preferred stock equity is $40 per share and the current yield on their debt is 8%. Ford has a beta of 1.7, the market return is 11%, and the risk-free rate of interest is 3%. Ford's preferred stock pays a dividend of $5 each year. Ford's debt pays a coupon rate of 7% and has 15 years until maturity (assume each bond has a face value of $1000). What is Ford's weighted average cost of capital if its tax rate is 30%? Cash Current Assets $350,000 $1,000,000 Current Liabilities $50,000 Long-Term Debt $14,000,000 Total Liabilities $14,050,000 Preferred Stock ($10 par) $500,000 Long-Term Assets $16,150,000 Common Stock ($.10 par) $10,000 Retained Earnings $2,940,000 Total Common Equity $2,950,000 Total Liabilities and Total Assets $17,500,000 $17,500,000 Equity

Answer rating: 100% (QA)

To calculate Fords weighted average cost of capital WACC we need to determine the weight of each com... View the full answer