None You are given the following information on Parrothead Enterprises:Debt:Common stock:9,900 7.4 percent coupon bonds outstanding, with 21 years to maturityand a quoted price of 106.25. These bonds pay interest semiannuallyand have a par value of $1,000.270,000 shares of common stock selling for $65.40 per share. The stockhas a beta of .97 and will pay a dividend of $3.60 next year. Thedividend is expected to grow by 5.4 percent per year indefinitely.Preferred stock: 8,900 shares of 4.7 percent preferred stock selling at $94.90 pershare. The par value is $100 per share.Market:11.1 percent expected return, risk-free rate of 4.05 percent, and a 24percent tax rate.Calculate the company's WACC.Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.Answer is complete but not entirely correct.WACC8.81%

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

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You are given the following information on Parrothead Enterprises: Debt: 9,300 6.5 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 104.75. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 240,000 shares of common stock selling for $64.80 per share. The stock has a beta of .93 and will pay a dividend of $3.00 next year. The dividend is expected to grow by 5.3 percent per year indefinitely. Preferred stock: 8,300 shares of 4.65 percent preferred stock selling at $94.30 per share. The par value is $100 per share. Market: 11.7 percent expected return, risk-free rate of 3.75 percent, and a 23 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.) WACC %
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Vijay
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