ABC Inc.'s capital structure is 55% debt, 20% preferred, and 30% common equity, and its tax rate is 25%. For financing, (a) ABC sold a non-callable bond several years ago that now has 15 years to maturity with 8% annual coupon, paid semiannually, at a price of $1,055, and a par value of $1,000. (b) ABC sold a perpetual preferred stock for $95.50 per share, with a $7.50 annual dividend and a flotation cost of 3.00% of the price. (c) ABC also has beta = 1.2, risk free rate of return rRF = 6.00%; market risk premium RPM = 7.00%; The question is: What is the company's WACC?
ABC Inc.'s capital structure is 55% debt, 20% preferred, and 30% common equity, and its tax rate is 25%. For financing, (a) ABC sold a non-callable bond several years ago that now has 15 years to maturity with 8% annual coupon, paid semiannually, at a price of $1,055, and a par value of $1,000. (b) ABC sold a perpetual preferred stock for $95.50 per share, with a $7.50 annual dividend and a flotation cost of 3.00% of the price. (c) ABC also has beta = 1.2, risk free rate of return rRF = 6.00%; market risk premium RPM = 7.00%; The question is: What is the company'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
Problem 1PS
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ABC Inc.'s capital structure is 55% debt, 20% preferred, and 30% common equity, and its tax rate is 25%. For financing, (a) ABC sold a non - callable bond several years ago that now has 15 years to maturity with 8% annual coupon, paid semiannually, at a price of $1,055, and a par value of $1,000. (b) ABC sold a perpetual
Transcribed Image Text:ABC Inc.'s capital structure is 55% debt, 20% preferred, and 30% common equity, and its tax rate is
25%. For financing, (a) ABC sold a non-callable bond several years ago that now has 15 years to
maturity with 8% annual coupon, paid semiannually, at a price of $1,055, and a par value of $1,000. (b)
ABC sold a perpetual preferred stock for $95.50 per share, with a $7.50 annual dividend and a flotation
cost of 3.00% of the price. (c) ABC also has beta = 1.2, risk free rate of return rRF = 6.00%; market risk
premium RPM = 7.00%; The question is: What is the company's WACC?
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