ALCULATE WACC BASED ON THE FOLLOWING FIGURES: Bonds $35,000,000 (35%) Preferred Stock $15,000,000 (15%) Common Equity $50,000,000 (50%) Total $100,000,000 Data to be used in the calculation of the cost of debt: Par value = $1,000, non-callable Market value = $1,085.59 Coupon interest = 6%, annual payments Remaining maturity = 20 years New bonds can be privately placed without any flotation costs Data to be used in the calculation of the cost of preferred stock: Par value = $100 Annual dividend = 7.5% of par Market value = $102 Flotation cost = 4% Data to be used in the calculation of the cost of common equity: CAPM data: VEC’s beta = 1.2 The yield on T-bonds = 3% Market risk premium = 7% DCF data: Stock price = $27.08 Last year’s dividend (D0) = $2.10 Expected dividend growth rate = 4% Bond-yield-plus-risk-premium data: Risk premium = 5.5% Amount of retained earnings available = $80,000 Floatation cost for newly issued shares = 7%
CALCULATE WACC BASED ON THE FOLLOWING FIGURES:
Bonds $35,000,000 (35%)
Common Equity $50,000,000 (50%)
Total $100,000,000
Data to be used in the calculation of the cost of debt:
Par value = $1,000, non-callable
Market value = $1,085.59
Coupon interest = 6%, annual payments
Remaining maturity = 20 years
New bonds can be privately placed without any flotation costs
Data to be used in the calculation of the cost of preferred stock:
Par value = $100
Annual dividend = 7.5% of par
Market value = $102
Flotation cost = 4%
Data to be used in the calculation of the
VEC’s beta = 1.2
The yield on T-bonds = 3%
Market risk premium = 7%
DCF data:
Stock price = $27.08
Last year’s dividend (D0) = $2.10
Expected
Bond-yield-plus-risk-premium data:
Risk premium = 5.5%
Amount of
Floatation cost for newly issued shares = 7%
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