In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 60,000 shares of common stock outstanding that has a pa value of $10 per share and a current market price of $150 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? (Round "Interest or Dividend Rate", "After-tax Rate or Expected Return" and "Cost of Capital Component to 2 decimal places (i.e. .1234 = 12.34%), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.) Bond Preferred Stock Common Stock Total $ Book Value 0 Interest or Dividend Rate % % % After-tax Rate or Expected Return % % % Current Market Values $ 0 Weights 0.000 Cost of Capital Components % % % 0.00 % Show less
In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 60,000 shares of common stock outstanding that has a pa value of $10 per share and a current market price of $150 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? (Round "Interest or Dividend Rate", "After-tax Rate or Expected Return" and "Cost of Capital Component to 2 decimal places (i.e. .1234 = 12.34%), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.) Bond Preferred Stock Common Stock Total $ Book Value 0 Interest or Dividend Rate % % % After-tax Rate or Expected Return % % % Current Market Values $ 0 Weights 0.000 Cost of Capital Components % % % 0.00 % Show less
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
Related questions
Question
qw.127.
Transcribed Image Text:Below is information regarding the capital structure of Micro Advantage Incorporated. On the basis of this information you are asked to
respond to the following three questions:
Required:
1. Micro Advantage issued a $5,100,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 7%.
Today, the bond is selling at 105 (i.e., 105% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt?
2. Micro Advantage has $5,060,000 preferred stock outstanding that it sold for $22 per share. The preferred stock has a per share par
value of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the
after-tax cost of the preferred stock?
3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 60,000 shares of common
stock outstanding that has a par value of $10 per share and a current market price of $150 per share. The expected after-tax market
return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)?
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1 Required 2
In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 60,000 shares of common stock outstanding that has a pa
value of $10 per share and a current market price of $150 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro
Advantage's weighted-average cost of capital (WACC)? (Round "Interest or Dividend Rate", "After-tax Rate or Expected Return" and "Cost of Capital Component:
to 2 decimal places (i.e. .1234 = 12.34%), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.)
Bond
Preferred Stock
Common Stock
Total
Required 3
$
Book Value
0
Interest or
Dividend Rate
%
%
%
After-tax Rate or
Expected Return
%
%
%
Current Market
Values
$
EA
0
Weights
0.000
Cost of Capital
Components
%
%
%
0.00 %
Show less
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