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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Question
Consider the following information for Watson Power Company: |
Debt: | 2,500 6 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. |
---|---|
Common stock: | 50,000 shares outstanding, selling for $64 per share; the beta is 1.1. |
7,500 shares of 5.5 percent preferred stock outstanding, currently selling for $106 per share. | |
Market: | 8 percent market risk premium and 5 percent risk-free rate. |
Assume the company's tax rate is 34 percent. |
Find the WACC. |
Multiple Choice
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