Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semiannual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. The WACC of the company is: a. 5.67% b. 8.8% c. 6.57% d. 6.23%
Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semiannual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. The WACC of the company is: a. 5.67% b. 8.8% c. 6.57% d. 6.23%
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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Consider Higgins Production which has the following information about its capital structures:
- Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semiannual payments
- Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80
-
Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share
- Market Information - 6 percent market risk premium and 4 percent risk-free rate.
The WACC of the company is:
a.
5.67%
b.
8.8%
c.
6.57%
d.
6.23%
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