You are given the following information on Parrothead Enterprises: Debt: 9,400 6.6 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 105. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 245,000 shares of common stock selling for $64.90 per share. The stock has a beta of .94 and will pay a dividend of $3.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely.
You are given the following information on Parrothead Enterprises: Debt: 9,400 6.6 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 105. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 245,000 shares of common stock selling for $64.90 per share. The stock has a beta of .94 and will pay a dividend of $3.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely.
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
| You are given the following information on Parrothead Enterprises: | |
| Debt: |
9,400 6.6 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 105. These bonds pay interest semiannually and have a par value of $1,000. |
| Common stock: |
245,000 shares of common stock selling for $64.90 per share. The stock has a beta of .94 and will pay a dividend of $3.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely. |
| 8,400 shares of 4.7 percent preferred stock selling at $94.40 per share. The par value is $100 per share. | |
| Market: | 11.6 percent expected return, risk-free rate of 3.8 percent, and a 24 percent tax rate. |
|
Calculate the company's WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. |
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