I have a finance final tomorrow, and having trouble calculating the WACC. I have two take home problems, and was wondering if someone could explain how to solve these problems? I am not asking to be given the answers, that would not help me on the test, but just tell me how I would go about doing them in the easiest to understand way possible. I have another problem I need help with that I will also be posting. Again, not asking for answers, just explanations.
(1) The bond of Company ABC has 5 years to maturity. The bond’s coupon rate is 8% and it is selling at $950. The total value of the bonds is $20M. The company also has preferred stocks, which are worth $10M. The preferred stock pays a dividend of $1 a share and currently sells at $10 a share. The common stocks of the company are worth $30M. The beta of the common stock is 1.5, the market risk premium is 8%, the risk free rate is 6%, and the firm’s tax rate is 35%. What is the company’s WACC?
2006-12-06
02:56:19
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3 answers
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asked by
pixie_vixen117
4