CER Corporation has 8.75 million shares of common stock outstanding, 215,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the following: (d) Cost of debt. (e) Weighted Average Cost of Capital (WACC)

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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QUESTION 3 b)
CER Corporation has 8.75 million shares of common stock outstanding, 215,000 shares
of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual
bond outstanding. The common stock is currently sells for RM34 per share and has a
beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have
15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are
yielding 5%, and corporate tax rate is 35%.

Calculate the following:

(d) Cost of debt.

(e) Weighted Average Cost of Capital (WACC).

thank you

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