Templeton Extended Care Facilities, Inc. is considering the acquisition of a chainof cemeteries for $400 million. Because the primary asset of this business is realthe majority of the money needed to buy the business. The current owners haveestate, Templeton's management has determined that they will be able to borrowno debt financing but Templeton plans to borrow $300 million and invest only$100 million in equity ($40 million in Preferred Shared and $60 million inCommon Shares) in the acquisition.Templeton is issuing new common stock at a market price of $27.Dividends last year were $1.45 and are expected to grow at an annualrate of 6% forever.• Templeton is issuing a $1000 par value bond that pays 8% annualinterest and matures in 15 years. Investors are willing to pay $950 forthe bond and Temple faces a tax rate of 35%.The preferred stock of Templeton currently sells for $36 a share andpays $2.50 in dividends annually●What is the Weighted Average Cost of capital?

According to the given question, we are required to compute the weighted average cost of capital.…

Answered: mpleton Extended Care Facilities, Inc.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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