Madison Motors has provided you the following information: The yield to maturity on their newly issued debt is 7.5% . Their common stock has an equity beta of 1.36 • T-Bills are returning 3.0%, and the Dow Jones Industrial market index is returning 6.6% • The company's preferred stock is selling for $26.03 and pays an annual dividend of $2.07 . The company's capital structure is composed of 55% common equity, 40% debt and the remainder in preferred stock • The company's tax rate is 37% Based on the information given, what is Madison Motors' WACC?
Madison Motors has provided you the following information: The yield to maturity on their newly issued debt is 7.5% . Their common stock has an equity beta of 1.36 • T-Bills are returning 3.0%, and the Dow Jones Industrial market index is returning 6.6% • The company's preferred stock is selling for $26.03 and pays an annual dividend of $2.07 . The company's capital structure is composed of 55% common equity, 40% debt and the remainder in preferred stock • The company's tax rate is 37% Based on the information given, what is Madison Motors' 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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Question
Cocentration limit is being calculated by making use of maximum loss as percent of capital and taking loss rate as well. Concentration limit = Maximum loss as percent of capital * (1/ Loss rate)
Here, Maximum loss as percent of capital = 10% Concentration limit = 19% Concentration limit = Maximum loss as percent of capital * (1/Loss rate) 19% = 10% * 1/ Loss rate Loss rate = 10%/19% = 52.63%
Transcribed Image Text:Madison Motors has provided you the following information:
. The yield to maturity on their newly issued debt is 7.5%
Their common stock has an equity beta of 1.36
• T-Bills are returning 3.0%, and the Dow Jones Industrial market index is returning 6.6%
.
The company's preferred stock is selling for $26.03 and pays an annual dividend of $2.07
• The company's capital structure is composed of 55% common equity, 40% debt and the remainder in preferred stock
The company's tax rate is 37%
.
Based on the information given, what is Madison Motors' WACC?
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