Hw.2. Calculate the WACC of a given company according to the following information.Common Stock: 200,000 shares common stock selling for $66 per share. The stock has a beta of0.8.Market: The expected return on the market is 10.5%, and the risk-free rate of return is 2.5%.Debt: 15,000 5% coupon bonds outstanding, $1,000 par value, priced at 95.5% of the par value,with 15 years to maturity. These bonds pay interest semiannually.Preferred Stock: 50,000 shares of preferred stock with a dividend of $2.60 per share. It iscurrently selling at $97 per share. The par value is $100.Tax bracket = 35%Please enter your answer as a PERCENT rounded to 2 decimal places.O 5.5890O 7.40976.06886.5454O9.95715.9393

Weighted average cost of capital is weighted cost of debt, weighted cost of eqiuty and weighted cost…

Answered: Calculate the WACC of a given company…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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S Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $10 per share and has a beta of 0.9. There are 4 million common shares outstanding. The market risk premium is 8%, the risk-free rate is 4%, and the firm's tax rate is 21%. Assets Cash and short-term securities $ 3.0 Accounts receivable. 3.0 Inventories Plant and equipment Total 7.0 25.0 $ 38.0 a. Market debt-to-value ratio b. WACC BOOK-VALUE BALANCE SHEET (Figures in 5 millions) Liabilities and Net Worth Bonds, coupon 5%, paid annually (maturity 10 years, current yield to maturity = 7%) Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? Note: For all the requirements, do not round intermediate calculations. Enter your…
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