Complete the table given below and compute the WACC from theinformation provided after the table template. capital component market value weight cost of capital weight x cost of capital debt common stock preferred shares The following balance sheet extract relates to the Spread-Out AirlinesLtd.Bonds Payable $1,000,000Preferred Stock $2,000,000Common Stock $3,000,000 Additional Information:1. The bonds are 8%, annual coupon bonds, with 9 years tomaturity and are currently selling for 90% of par.2. The company’s common shares which have a book value of $25per share are currently selling at $20 per share.3. The preferred shares are 5% preferred shares with a bookvalue of $100 per share. These shares are currentlyselling at $80 per share.4. The company has an equity beta of 1.35 and the current Treasury bill rate is 3.0%. The market risk premium is1.5%5. The company’s tax rate is 30%.
Complete the table given below and compute the WACC from the
information provided after the table template.
| capital component | market value | weight | cost of capital | weight x cost of capital |
| debt | ||||
| common stock | ||||
| preferred shares |
The following balance sheet extract relates to the Spread-Out Airlines
Ltd.
Bonds Payable $1,000,000
Preferred Stock $2,000,000
Common Stock $3,000,000
Additional Information:
1. The bonds are 8%, annual coupon bonds, with 9 years to
maturity and are currently selling for 90% of par.
2. The company’s common shares which have a book value of $25
per share are currently selling at $20 per share.
3. The preferred shares are 5% preferred shares with a book
value of $100 per share. These shares are currently
selling at $80 per share.
4. The company has an equity beta of 1.35 and the current Treasury bill rate is 3.0%. The market risk premium is
1.5%
5. The company’s tax rate is 30%.
Step by step
Solved in 2 steps
