Consider the following information for Watson Power Co.: Debt: 4,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 108,000 shares outstanding, selling for $61 per share; the beta is 1.08. Preferred stock: 14,000 shares of 6.5 percent preferred stock outstanding, currently selling for $104 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC.
Consider the following information for Watson Power Co.: Debt: 4,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 108,000 shares outstanding, selling for $61 per share; the beta is 1.08. Preferred stock: 14,000 shares of 6.5 percent preferred stock outstanding, currently selling for $104 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the 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
Problem 1PS
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Consider the following information for Watson Power Co.: |
Debt: | 4,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. | ||
Common stock: | 108,000 shares outstanding, selling for $61 per share; the beta is 1.08. | ||
|
14,000 shares of 6.5 percent preferred stock outstanding, currently selling for $104 per share. | ||
Market: | 9 percent market risk premium and 6 percent risk-free rate. | ||
Assume the company's tax rate is 34 percent. |
Find the WACC. |
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