National Computer Corporation (NCC) plans to raise 30% of its required capital as debt, 10% as preferred stock, and 60% as common equity. This is its capital structure. If NCC can borrow at an interest rate of 11%, and if it has a marginal tax rate of 40%, NCC has preferred stock that pays a S10 dividend per share and sells for S100 per share. If NCC issued new shares of preferred stock, it would incur an underwriting ( or flotation) cost of 2.5%, per share. The cost of equity 14%. Required: Calculate WACC of NCC
National Computer Corporation (NCC) plans to raise 30% of its required capital as debt, 10% as preferred stock, and 60% as common equity. This is its capital structure. If NCC can borrow at an interest rate of 11%, and if it has a marginal tax rate of 40%, NCC has preferred stock that pays a S10 dividend per share and sells for S100 per share. If NCC issued new shares of preferred stock, it would incur an underwriting ( or flotation) cost of 2.5%, per share. The cost of equity 14%. Required: Calculate WACC of NCC
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
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National Computer Corporation (NCC) plans to raise 30% of its required capital as debt, 10% as
preferred stock, and 60% as common equity. This is its capital structure. If NCC can borrow at an
interest rate of 11%, and if it has a marginal tax rate of 40%, NCC has preferred stock that pays a
s10 dividend per share and sells for S100 per share. If NCC issued new shares of preferred stock, it
would incur an underwriting ( or flotation) cost of 2.5%, per share. The cost of equity 14%.
Required: Calculate WACC of NCC
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