Having successfully issued their preference shares, Micron Industries is seeking to determine its Weighted Average Cost of Capital, so that it can be used as the company’s required return in evaluating upcoming capital projects. Utilising information from Micron Industries’ financial statements, presented on page 1, together with current information, the company has the following capital structure: Debt: Bonds outstanding has a face value of $90,000,000, currently selling at 98% of par. The coupon rate on these bonds is 9% paid semi-annually and there is 12 years left to maturity. (Hint: you can use the lowest multiple of $1,000 for the YTM calculation only) Common stock: 144,000,000 shares of common stock outstanding with a market price of $27.30. Preferred stock: 100,000,000 shares of preferred shares outstanding with a market price of $60. The annual dividend is $4.50.Page 4 of 6 Additional Information: The Company’s tax rate is 35%. The current risk free rate is 3.50%; The market risk premium is 8%. The Company’s beta is 1.2. Required: Calculate the Weighted Average Cost of Capital for Micron Industries Limited. NOT ASKING FOR HELP WITH HOW TO USE THE SITE. THIS IS A QUESTION. Attached are the finacial statements for the company.
Having successfully issued their
Debt: Bonds outstanding has a face value of $90,000,000, currently selling at 98% of par. The coupon rate on these bonds is 9% paid semi-annually and there is 12 years left to maturity. (Hint: you can use the lowest multiple of $1,000 for the YTM calculation only)
Common stock: 144,000,000 shares of common stock outstanding with a market price of $27.30.
Preferred stock: 100,000,000 shares of preferred shares outstanding with a market price of $60. The annual dividend is $4.50.Page 4 of 6
Additional Information:
The Company’s tax rate is 35%.
The current risk free rate is 3.50%; The market risk premium is 8%.
The Company’s beta is 1.2.
Required: Calculate the Weighted Average Cost of Capital for Micron Industries Limited.
NOT ASKING FOR HELP WITH HOW TO USE THE SITE. THIS IS A QUESTION. Attached are the finacial statements for the company.
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