The common stock has a beta of 1.4, current risk-free rates are 3% and the market risk premium is 7%. Investors in the preferred shares require a 7.5% return. Each of the company's 20-year bonds have a par value of $5,000, a coupon rate of 5% and sell for $5,500. The company's tax rate is 30%. What is the company's WACC?

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Market Value: Debt: 2,700,000 Preferred Stock 10/share Book Value: 2,200,000 11/share #of Shares: 500,000 2,000,000 Market Value: Debt: 2,700,000 Preferred Stock 10/share Book Value: 2,200,000 11/share #of Shares: 500,000 2,000,000

Answer rating: 100% (QA)

Solution To calculate the companys WACC we need to find the weights and costs of each component of its capital structure The weight of debt is the mar... View the full answer