ABC, Inc. has the following securities outstanding in the market. Common Stock 10,000,000 shares outstanding at a market price of $150.00. A recent analyst report shows these shares have a beta of 1.2. Preferred Stock 250,000 shares outstanding with a dividend of 5% of par. Market price is $75, a $50 discount to par. AA-Rated Corporate Bonds 750,000 bonds with par value of $1000 each and a semi-annual coupon of 7.5%. The bonds mature in 25 years and are currently selling at a price of 98.75. Today the expected return on the market is 8% and the market risk premium is 4%. The company has a marginal tax rate of 21%. What is ABC, Inc.'s WACC?
ABC, Inc. has the following securities outstanding in the market. Common Stock 10,000,000 shares outstanding at a market price of $150.00. A recent analyst report shows these shares have a beta of 1.2. Preferred Stock 250,000 shares outstanding with a dividend of 5% of par. Market price is $75, a $50 discount to par. AA-Rated Corporate Bonds 750,000 bonds with par value of $1000 each and a semi-annual coupon of 7.5%. The bonds mature in 25 years and are currently selling at a price of 98.75. Today the expected return on the market is 8% and the market risk premium is 4%. The company has a marginal tax rate of 21%. What is ABC, Inc.'s 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
Section: Chapter Questions
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ABC, Inc. has the following securities outstanding in the market. Common Stock 10,000,000 shares outstanding at a market price of $150.00. A recent analyst report shows these shares have a beta of 1.2. Preferred Stock 250,000 shares outstanding with a dividend of 5% of par. Market price is $75, a $50 discount to par. AA-Rated Corporate Bonds 750,000 bonds with par value of $1000 each and a semi-annual coupon of 7.5%. The bonds mature in 25 years and are currently selling at a price of 98.75. Today the expected return on the market is 8% and the market risk premium is 4%. The company has a marginal tax rate of 21%.
What is ABC, Inc.'s WACC?
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