You are given the following information on Parrothead Enterprises: Debt: Common stock: 9,900 7.4 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 106.25. These bonds pay interest semiannually and have a par value of $1,000. 270,000 shares of common stock selling for $65.40 per share. The stock has a beta of .97 and will pay a dividend of $3.60 next year. The dividend 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 per share. The par value is $100 per share. Market: 11.1 percent expected return, risk-free rate of 4.05 percent, and a 24 percent 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. WACC 8.81%
You are given the following information on Parrothead Enterprises: Debt: Common stock: 9,900 7.4 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 106.25. These bonds pay interest semiannually and have a par value of $1,000. 270,000 shares of common stock selling for $65.40 per share. The stock has a beta of .97 and will pay a dividend of $3.60 next year. The dividend 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 per share. The par value is $100 per share. Market: 11.1 percent expected return, risk-free rate of 4.05 percent, and a 24 percent 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. WACC 8.81%
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
Related questions
Question
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 maturity
and a quoted price of 106.25. These bonds pay interest semiannually
and have a par value of $1,000.
270,000 shares of common stock selling for $65.40 per share. The stock
has a beta of .97 and will pay a dividend of $3.60 next year. The
dividend 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 per
share. The par value is $100 per share.
Market:
11.1 percent expected return, risk-free rate of 4.05 percent, and a 24
percent 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.
WACC
8.81%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F303402e3-a080-44db-afc7-3c07b32802ca%2F91d649d1-221c-450e-a8d6-2949ffeb0fbb%2Fx6musxm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You are given the following information on Parrothead Enterprises:
Debt:
Common stock:
9,900 7.4 percent coupon bonds outstanding, with 21 years to maturity
and a quoted price of 106.25. These bonds pay interest semiannually
and have a par value of $1,000.
270,000 shares of common stock selling for $65.40 per share. The stock
has a beta of .97 and will pay a dividend of $3.60 next year. The
dividend 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 per
share. The par value is $100 per share.
Market:
11.1 percent expected return, risk-free rate of 4.05 percent, and a 24
percent 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.
WACC
8.81%
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT