Question: please help Given the information calculate the Weighted Average Cost of Capital for the firm . You are to assume that the Capital Asset Pricing
please help
Given the information calculate the Weighted Average Cost of Capital for the firm. You are to assume that the Capital Asset Pricing Model is to be used for the cost of equity.
| Firm Beta | 1.15 | |||
| Risk-Free Rate | 1.25% | |||
| Market Risk Premium | 5.90% | |||
| Firm Tax Rate | 35% | |||
| Dividend at end of the year | $1.10 | |||
| Current Common Stock Price | $14.82 | |||
| Expected Dividend Growth | 1% | |||
| Number of Common Shares Outstanding | 3,000,000 | |||
| Number of Preferred Shares Outstanding | 300,000 | |||
| Preferred Price Per Share | $20.00 | |||
| Preferred Stock Dividend | $1.25 | |||
| Bond A Details | ||||
| Face Value | $1,000 | |||
| Annual Coupon Rate | 7% | |||
| Current Market Price | $1,104.52 | |||
| Years Remaining | 9 | |||
| Payments | Semi-Annual | |||
| Bond B Details | ||||
| Face Value | $1,000 | |||
| Annual Coupon Rate | 6% | |||
| Current Yield to Maturity | 5.10% | |||
| Years Remaining | 19 | |||
| Payments | Annual | |||
| Book Value Balance Sheet (in millions) | ||||
| Cash and Short-Term Securities | $ 10 | Bonds* | $ 20 | |
| (40% Bond A, 60% Bond B) | ||||
| Accounts Receivable | $ 5 | Preferred Stock | $ 5 | |
| Inventories | $ 7 | Common Stock | $ 15 | |
| Plant and Equipment | $ 28 | Retained Earnings | $ 10 | |
| Total | $ 50 | Total | $ 50 | |
| *Assume that all bonds are listed at face value on the Book Value Balance Sheet |
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