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%
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
Related questions
Question
None
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
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
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education