Given the following information for Watson Power Co., find the WACC. Assume the company tax rate is 20 percent. Debt: 9,000 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101 percent of par (meaning its current price is $1,010). The bonds make semiannual coupon payments. Floatation cost is $9. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.3 per share dividends, sell for $98 per share with floatation cost of $2. Common stock: 732,000 shares outstanding, selling for $86 per share; beta is 1.08. Market: 7 percent market risk premium and 2 percent risk-free rate.|
Given the following information for Watson Power Co., find the WACC. Assume the company tax rate is 20 percent. Debt: 9,000 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101 percent of par (meaning its current price is $1,010). The bonds make semiannual coupon payments. Floatation cost is $9. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.3 per share dividends, sell for $98 per share with floatation cost of $2. Common stock: 732,000 shares outstanding, selling for $86 per share; beta is 1.08. Market: 7 percent market risk premium and 2 percent risk-free rate.|
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
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Transcribed Image Text:2. Given the following information for Watson Power Co., find the WACC. Assume the company
tax rate is 20 percent. Debt: 9,000 bonds with coupon rate of 6 percent. $1,000 par value, 25 years
to maturity, selling for 101 percent of par (meaning its current price is $1,010). The bonds make
semiannual coupon payments. Floatation cost is $9. Preferred stock: 25,000 shares of preferred
stock outstanding currently pay $5.3 per share dividends, sell for $98 per share with floatation cost
of $2. Common stock: 732,000 shares outstanding, selling for $86 per share; beta is 1.08.
Market: 7 percent market risk premium and 2 percent risk-free rate.
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