Crow Academy leadership wants to know its WACC given its current capitalstructure. The capital structure data is as follows. Equity: 2,843,200 sharesoutstanding, price $18.59, stock beta 0.96. Preferred stock: 675,000 sharesoutstanding, price $21.74, fixed dividend $0.75. Debt: 242,000 zero annualcoupon bonds issued, price is 38% of par, 15 years to maturity. If the currentmarket return is 14.28%, the risk-free rate is 3.18%, and the tax rate is 21%,what is the company's weighted average cost of capital (WACC)?

The weighted average cost of capital determines the cost of capital by accounting for the relative…

Answered: 18%, and the tax rate is 21% what is…

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18%, and the tax rate is 21% what is the company's weighted average cost of capital (WACC)?

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

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Question

Crow Academy leadership wants to know its WACC given its current capital
structure. The capital structure data is as follows. Equity: 2,843,200 shares
outstanding, price $18.59, stock beta 0.96. Preferred stock: 675,000 shares
outstanding, price $21.74, fixed dividend $0.75. Debt: 242,000 zero annual
coupon bonds issued, price is 38% of par, 15 years to maturity. If the current
market return is 14.28%, the risk-free rate is 3.18%, and the tax rate is 21%,
what is the company's weighted average cost of capital (WACC)?

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