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Calculate the WACC of the Firm

78. Calculate the WACC of the firm given the following information: (a) Equity -$20,000, (b) Debt - $20,000, (c) Preferred Stock - $4,000, (d) Tax Rate?" 30%, (e) Debt? Coupon $70, Price $1,250, Time until maturity: 20, (f) Equity, Market Rate 10%, and Risk free rate 3%, Beta 1.2, (g) Preferred Stock, Coupon $50, Price $55.

79. Using the information in the above problem and the additional information presented in here, calculate the WACC of the firm given the following information: (a) Equity, Most Recent Dividend $2.00, Growth Rate 3%, and Price $18.

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calculate the WACC
78. Calculate the WACC of the firm given the following information: (a) Equity -$20,000, (b) Debt - $20,000, (c) Preferred Stock - $4,000, (d) Tax Rate 30%, (e) Debt Coupon $70, Price $1,250, Time until maturity 20, (f) Equity Market Rate 10%, and Risk free rate 3%, Beta 1.2, (g) Preferred Stock Coupon $50, Price $55.

Ks = risk free rate + beta(equity market rate - risk free rate)
Ks = 3% + 1.2(10% - 3%)
Ks = 11.4%

Kp = ($55 - $50)/$50 = 0.10 or 10%

We need to calculate how much is the bond's cost by using the formula as follows: -

where B is the issued price/current price
C is the coupon payment
r is the require yield to maturity
...

Solution Summary

This solution is comprised of a detailed explanation to calculate the WACC of the firm.

$2.19