CHAPTER 14 Question 4 (8 points). M&M Corp. has the following information: Debt: 10,000 7% coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 1090; the bonds make annual payments. Preferred stock: 30,000 preferred shares outstanding, currently selling for $60 per share. The annual dividend of preferred stock is $3.0. Common stock: 500,000 shares outstanding, selling for $65 per share; the beta is 1.25. The market risk premium is 7% and the risk-free rate is 3.5%. The corporate tax rate is 35%. a. Calculate the cost of debt, cost of preferred stock, and cost of equity? (3 points) b. Calculate the market values of debt, preferred stock, and equity? (3 points) c. Calculate the WACC? (2 points)

Question 4 (8 points). M\&M Corp. has the following information: Debt: 10,000 7\% coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 1090 ; the bonds make annual payments. Preferred stock: 30,000 preferred shares outstanding, currently selling for $60 per share. The annual dividend of preferred stock is $3.0. Common stock: 500,000 shares outstanding, selling for $65 per share; the beta is 1.25 . The market risk premium is 7% and the risk-free rate is 3.5%. The corporate tax rate is 35%. a. Calculate the cost of debt, cost of preferred stock, and cost of equity? (3 points) b. Calculate the market values of debt, preferred stock, and equity? (3 points) c. Calculate the WACC? (2 points)