Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
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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![Problem 12-17 Calculating the WACC [LO 3]
You are given the following information on Parrothead Enterprises:
Debt:
Common stock:
Preferred stock:
Market:
9,500 7 percent coupon bonds outstanding, with 25 years to maturity and a
quoted price of 105.25. These bonds pay interest semiannually and have a par
value of $1,000.
WACC
250,000 shares of common stock selling for $65.00 per share. The stock has a
beta of .95 and will pay a dividend of $3.20 next year. The dividend is
expected to grow by 5 percent per year indefinitely.
8,500 shares of 4.5 percent preferred stock selling at $94.50 per share. The
par value is $100 per share.
11.5 percent expected return, risk-free rate of 3.85 percent, and a 25
percent tax rate.
Calculate the company's WACC.
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.
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Transcribed Image Text:Problem 12-17 Calculating the WACC [LO 3]
You are given the following information on Parrothead Enterprises:
Debt:
Common stock:
Preferred stock:
Market:
9,500 7 percent coupon bonds outstanding, with 25 years to maturity and a
quoted price of 105.25. These bonds pay interest semiannually and have a par
value of $1,000.
WACC
250,000 shares of common stock selling for $65.00 per share. The stock has a
beta of .95 and will pay a dividend of $3.20 next year. The dividend is
expected to grow by 5 percent per year indefinitely.
8,500 shares of 4.5 percent preferred stock selling at $94.50 per share. The
par value is $100 per share.
11.5 percent expected return, risk-free rate of 3.85 percent, and a 25
percent tax rate.
Calculate the company's WACC.
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.
%
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