Problem 15 (Use the spreadsheet provided on canvas or on Connect)

Given the following information for Lightning Power Co., find the WACC. Assume the companys tax rate is 35 percent.

Debt: 8,000 6.5 percent coupon bonds outstanding. $1,000 par value, 25 years to maturity,

selling for 106 percent of par; the bonds make semiannual payments.

Common stock: 310,000 shares outstanding, selling for $57 per share: the beta is 1.05.

Preferred Stock: 15,000 shares of 4 percent preferred stock outstanding, currently selling for 72 per share.

Market: 7 percent market risk premium and 4.5 percent risk-free rate.

WACC = Kd x Pd + Kpfd x Kpfd + Ke x Pe

The proportions, costs and weighted costs are in decimals to 4 places

Source Market Value Market Proportions Costs Weighted Costs Debt $ .0122 Preferred 1,080,000 Equity .6489 Total WACC =