Dragon Company's assets are $750 million, nanced through bank loans, bonds, preferred stocks, and common stocks. The

Dragon Company's assets are $750 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $100 million borrowed at 5%. Bonds: $280 million, paying an 8% coupon with semi- annual payments, and maturity of 10 years. Dragon sold its $1,000 par-value bonds for $970. Preferred Stocks: $120 million, paying $15 dividends per share. Dragon sold its preferred shares for $220. Common Stocks: $250 million, beta is 3.20, the risk-free rate is 5%, and the market rate is 10%. If Dragon is subject to 30% tax rate, what is the WACC?

Answer rating: 100% (QA)

To calculate the weighted average cost of capital WACC for Dragon Company we need to determine the cost of each component of its financing and then ca... View the full answer