Please show calculations. If using Excel, please show formulas and data.

Practice example:

What is the capital structure of this company based on market values ? (please calculate WACC)

*please assume these are corporate bonds that pay 2x annually

• Bond issue #1, maturity 12 years, coupon rate 9%, current YTM 9.75%, book value $10 million *
• Bond issue #2, maturity 16 years, coupon rate 9%, current YTM 7.75%, book value $15 million *
• Preferred stock, 500,000 shares, par $10 per share
• Common stock, par $1 per share, book value $10 million
• Market price of preferred stock is $17.50, market price of common stock is $15

What is the WACC if:

• Tax rate = 40%
• Preferred stock dividend = $1.50 per share
• Common stock dividend = $.375 per share
• Beta is 1.15
• RFR = 5.21%
• Expected return of the market = 14%