Explore BrainMass
Share

Explore BrainMass

    Weighted Average Cost of Capital (WACC) Calculations

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Let's try calculating the weighted average cost of capital (WACC). Calculate the WACC given the following assumptions: a. Company tax rate is 40 percent. b. Company has an outstanding bond issue with a 7-7/8 coupon, market price of 103-5/8 (percent of 100% par, in 32nds.), semiannual coupon payments, and 12 years to maturity. c. Company has an outstanding preferred stock issue paying an 8 percent dividend, $100 par, and a market price of $98.35. Flotation (issuance) costs on a new issue are 8 percent. d. Common equity financing is through retained earnings. The Company has a beta of 1.22. The market risk premium is 6 percent and the risk-free rate is 4 percent. The company's capital structure is 40 percent debt, 10 percent preferred, and 50 percent common equity.

    © BrainMass Inc. brainmass.com October 10, 2019, 1:21 am ad1c9bdddf
    https://brainmass.com/business/weighted-average-cost-of-capital/weighted-average-cost-capital-wacc-calculations-330781

    Attachments

    Solution Preview

    Check the attached sheet. The details & formula is mentioned in the ...

    Solution Summary

    The solution computes weighted average cost of capital (WACC).

    $2.19