Using the following information calculate the WACC of Aqua Ltd. The company has 0.3 million shares outstanding at a price of $92 per share. The beta of common stock of is 1.2. The risk-free rate is 5% and the market risk premium is 7%. The company issued 11% preference shares with a total value of $ 25 million. The company issued 9% bonds of $33.6 million.

Using the following information calculate the WACC of Aqua Ltd. The company has 0.3 million shares outstanding at a price of $92 per share. The beta of common stock of is 1.2. The risk-free rate is 5% and the market risk premium is 7%. The company issued 11% preference shares with a total value of $ 25 million. The company issued 9% bonds of $33.6 million.

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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Question

Using the following information calculate the WACC of Aqua Ltd.
The company has 0.3 million shares outstanding at a price of $92 per share. The
beta of common stock of is 1.2. The risk-free rate is 5% and the market risk
premium is 7%.
The company issued 11% preference shares with a total value of $ 25 million.
The company issued 9% bonds of $33.6 million.
The company pays corporate tax at 40 percent.
A. 9.59%
В. 9.89%
C. 10.99%
D. d.8.35%

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JS Corporation has 9 million shares of common stock outstanding, 250,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the cost of debt and Weighted Average Cost of Capital (WACC).
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Western Electric has 35,000 ordinary shares outstanding at a price per share of $47 and a rate of return of 13.5%. The firm has 5,000 preference shares paying 7% dividend outstanding at a price of $58 a share. The preferred share has a par value of $100. The outstanding bond has a total face value of $450,000 and currently sells for 102% of face. The pre-tax yield-to-maturity on the bond is 8.49%.Required:a) Calculate the total market value of the firm. b) Calculate the capital structure of the firm. (Please round up the result at 3 decimal places)c) Calculate the firm's weighted average cost of capital if the tax rate is 30%, assuming a classical tax system.

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