Fight Finance

Courses  Tags  Random  All  Recent  Scores

Scores
keithphw$6,001.61
Yuan$1,726.43
Zin$1,619.43
Jade$1,555.80
Carolll$1,522.43
Visitor$1,428.33
Visitor$1,373.33
zy$1,349.70
cuiting$1,289.70
Visitor$1,268.61
Visitor$1,251.28
Visitor$1,249.70
Visitor$1,153.33
Emma Lu$1,100.00
Skywalke...$1,070.00
mm11$1,050.33
ninalee$1,039.70
Visitor$1,035.61
Visitor$1,024.70
Doris$1,009.70
 

Question 97  WACC, no explanation

A company has:

  • 10 million common shares outstanding, each trading at a price of $90.
  • 1 million preferred shares which have a face (or par) value of $100 and pay a constant dividend of 9% of par. They currently trade at a price of $120 each.
  • Debentures that have a total face value of $60,000,000 and a yield to maturity of 6% per annum. They are publicly traded and their market price is equal to 90% of their face value.
  • The risk-free rate is 5% and the market return is 10%.
  • Market analysts estimate that the company's common stock has a beta of 1.2. The corporate tax rate is 30%.

What is the company's after-tax Weighted Average Cost of Capital (WACC)? Assume a classical tax system.




Copyright © 2014 Keith Woodward