Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of $8, and 200,000 bonds with a 10 percent coupon (semiannual interest) and 20 years to maturity. At present, the common stock is selling for $50 per share, the bonds are selling for $950.62 per $1,000 of face value, and the preferred stock is selling at $74 per share. The estimated market return is 13%, the risk free rate is 8%, and Bluefield's beta is 1.4. Bluefield's tax rate is 30 percent. What is Bluefield's weighted average cost of capital (WACC)?
Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of $8, and 200,000 bonds with a 10 percent coupon (semiannual interest) and 20 years to maturity. At present, the common stock is selling for $50 per share, the bonds are selling for $950.62 per $1,000 of face value, and the preferred stock is selling at $74 per share. The estimated market return is 13%, the risk free rate is 8%, and Bluefield's beta is 1.4. Bluefield's tax rate is 30 percent. What is Bluefield'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
Section: Chapter Questions
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![Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred
stock that pays an annual dividend of $8, and 200,000 bonds with a 10 percent coupon
(semiannual interest) and 20 years to maturity. At present, the common stock is selling for $50
per share, the bonds are selling for $950.62 per $1,000 of face value, and the preferred stock
is selling at $74 per share. The estimated market return is 13%, the risk free rate is 8%, and
Bluefield's beta is 1.4. Bluefield's tax rate is 30 percent.
What is Bluefield's weighted average cost of capital (WACC)?
Short Answer
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Transcribed Image Text:Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred
stock that pays an annual dividend of $8, and 200,000 bonds with a 10 percent coupon
(semiannual interest) and 20 years to maturity. At present, the common stock is selling for $50
per share, the bonds are selling for $950.62 per $1,000 of face value, and the preferred stock
is selling at $74 per share. The estimated market return is 13%, the risk free rate is 8%, and
Bluefield's beta is 1.4. Bluefield's tax rate is 30 percent.
What is Bluefield's weighted average cost of capital (WACC)?
Short Answer
Toolbar navigation
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