Consider the following information for Watson Power Company: Debt: Common stock: Preferred stock: Market: 4,000 8 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. 96,000 shares outstanding, selling for $56 per share; the beta is 1.07. 13,500 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 34 percent.

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
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Consider the following information for Watson Power Company:
Debt:
Common stock:
Preferred stock:
Market:
4,000 8 percent coupon bonds outstanding, $1,000 par value, 21
years to maturity, selling for 102 percent of par; the bonds make
semiannual payments.
Find the WACC.
96,000 shares outstanding, selling for $56 per share; the beta is
1.07.
13,500 shares of 7 percent preferred stock outstanding,
currently selling for $104 per share.
9.5 percent market risk premium and 7 percent risk-free rate.
Assume the company's tax rate is 34 percent.
Transcribed Image Text:Consider the following information for Watson Power Company: Debt: Common stock: Preferred stock: Market: 4,000 8 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. Find the WACC. 96,000 shares outstanding, selling for $56 per share; the beta is 1.07. 13,500 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 34 percent.
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