Information on Lightning Power Co., is shown below. Assume the company’s tax rate is 24 percent. Debt: 17,400 6.5 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107 percent of par; the bonds make semiannual payments. Common stock: 580,000 shares outstanding, selling for $83.25 per share; beta is 1.20. Preferred stock: 24,500 shares of 4.45 percent preferred stock outstanding, currently selling for $91.90 per share. The par value is $100. Market: 6.2 percent market risk premium and 2.7 percent risk-free rate. What is the company's cost of each form of financing? A) Cost of equity B) Aftertax cost of debt C) Cost of preferred stock Calculate the company's WACC. WACC %
Information on Lightning Power Co., is shown below. Assume the company’s tax rate is 24 percent. Debt: 17,400 6.5 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107 percent of par; the bonds make semiannual payments. Common stock: 580,000 shares outstanding, selling for $83.25 per share; beta is 1.20. Preferred stock: 24,500 shares of 4.45 percent preferred stock outstanding, currently selling for $91.90 per share. The par value is $100. Market: 6.2 percent market risk premium and 2.7 percent risk-free rate. What is the company's cost of each form of financing? A) Cost of equity B) Aftertax cost of debt C) Cost of preferred stock Calculate the company's WACC. WACC %
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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Information on Lightning Power Co., is shown below. Assume the company’s tax rate is 24 percent.
| Debt: |
17,400 6.5 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107 percent of par; the bonds make semiannual payments. |
| Common stock: | 580,000 shares outstanding, selling for $83.25 per share; beta is 1.20. |
| Preferred stock: |
24,500 shares of 4.45 percent preferred stock outstanding, currently selling for $91.90 per share. The par value is $100. |
| Market: | 6.2 percent market risk premium and 2.7 percent risk-free rate. |
What is the company's cost of each form of financing?
A)
B) Aftertax cost of debt
C) Cost of preferred stock
Calculate the company's WACC.
WACC %
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