Consider the following information for Watson Power Company:Debt:Common stock:Preferred stock:Market:4,000 8 percent coupon bonds outstanding, $1,000 par value, 21years to maturity, selling for 102 percent of par; the bonds makesemiannual payments.Find the WACC.96,000 shares outstanding, selling for $56 per share; the beta is1.07.13,500 shares of 7 percent preferred stock outstanding,currently selling for $104 per share.9.5 percent market risk premium and 7 percent risk-free rate.Assume the company's tax rate is 34 percent.

Weighted average cost of capital is the minimum rate of return is company must earn on its…

Consider the following information for Watson Power Company: Debt: Common stock: Preferred stock: Market: 4,000 8 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. 96,000 shares outstanding, selling for $56 per share; the beta is 1.07. 13,500 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 34 percent.

Consider the following information for Watson Power Company: Debt: Common stock: Preferred stock: Market: 4,000 8 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. 96,000 shares outstanding, selling for $56 per share; the beta is 1.07. 13,500 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 34 percent.

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

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You are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: 9,600 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 105.5 . These bonds pay interest semiannually and have a par value of $1,000. 255,000 shares of common stock selling for $65.10 per share. The stock has a beta of .96 and will pay a dividend of $3.30 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. Market: 8,600 shares of 4.55 percent preferred stock selling at $94.60 per share. The par value is $100 per share. 11.4 percent expected return, risk-free rate of 3.9 percent, and a 21 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
You are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: Market: 8,600 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 107. These bonds pay interest semiannually and have a par value of $2,000. WACC 285,000 shares of common stock selling for $65.70 per share. The stock has a beta of 1.02 and will pay a dividend of $3.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. 9,200 shares of 4.6 percent preferred stock selling at $95.20 per share. The par value is $100 per share. 10.8 percent expected return, risk-free rate of 4.2 percent, and a 22 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. %
You are looking at the following information: Debt: Common stock: Preferred stock: Market: 5,000 8.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. 110,000 shares outstanding, selling for $62 per share; the beta is 1.2. 16,000 shares of 7.5 percent preferred stock (review my Ch.8 slide 43: what does ...% preferred stock" phrase mean?) outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7.5 percent risk-free rate. The company is in the 33 percent tax rate bracket based on its corporate income. Required: Find the WACC. (Do not round your intermediate calculations.)
Consider the following information for Evenflow Power Co., Debt: 4,000 7.5 percent coupon bonds outstanding, $1,000 par value, 23 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 100,000 shares outstanding, selling for $61 per share; the beta is 1.1. Preferred stock: 13,000 shares of 6.5 percent preferred stock outstanding, currently selling for $105 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 32 percent. Required: Find the WACC. (Do not round your intermediate calculations.) Multiple Choice 11.21% 10.96% 11.63% 10.71% 10.81%
Consider the following information for Watson Power Co.: Debt: 4,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 108,000 shares outstanding, selling for $61 per share; the beta is 1.08. Preferred stock: 14,000 shares of 6.5 percent preferred stock outstanding, currently selling for $104 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC.
Consider the following information for Watson Power Company:Debt: 5,500 5.5 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 105 percent of par; the bonds make semiannual payments.Common stock: 115,500 shares outstanding, selling for $59 per share; the beta is 1.19.Preferred stock: 19,500 shares of 4.5 percent preferred stock outstanding, currently selling for $108 per share.Market: 6 percent market risk premium and 4.5 percent risk-free rate.Assume the company's tax rate is 31 percent.Find the WACC.
Consider the following information for Watson Power Company: Debt: 3,500 7 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 84,000 shares outstanding, selling for $56 per share; the beta is 1.17. Preferred stock: 11,500 shares of 6.5 percent preferred stock outstanding, currently selling for $108 per share. Market: 8.5 percent market risk premium and 6.5 percent risk - free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 10.87 % 10.47 % 10.37% 11.31 % 10.66%
Consider the following information for Watson Power Company: Debt: 2,500 6 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 50,000 shares outstanding, selling for $64 per share; the beta is 1.1. Preferred stock: 7,500 shares of 5.5 percent preferred stock outstanding, currently selling for $106 per share. Market: 8 percent market risk premium and 5 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 8.83% 8.93% 9.23% 9.59% 8.73%
Given the following information for Huntington Electric Co., *Debt: 6,000 of 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 108 percent of par; the bonds make annual payments. *Preferred stock: 8000 shares of 7.2% preferred stock dividend rate, selling at $90 per share. *Common stock: 500,000 shares outstanding, selling for $70 per share; the beta is 1.12. *Market data: 10 percent market rate of return and 5 percent risk-free rate, and the corporate tax rate of 30%. What is the after tax, WACC of this company? What is the after-tax, WACC of this company? Group of answer choices .9.6639% 8% 9.9802% 10%
You are given the following information on Parrothead Enterprises: Debt: 9,400 6.6 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 105. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 245,000 shares of common stock selling for $64.90 per share. The stock has a beta of .94 and will pay a dividend of $3.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely. Preferred stock: 8,400 shares of 4.7 percent preferred stock selling at $94.40 per share. The par value is $100 per share. Market: 11.6 percent expected return, risk-free rate of 3.8 percent, and a 24 percent tax rate. Calculate the company's WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Consider the following information for Watson Power Company: Debt: 3, 500 8 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 80, 500 shares outstanding, selling for $59 per share; the beta is 1.09. Preferred stock: 12, 000 shares of 7.5 percent preferred stock outstanding, currently selling for $107 per share. Market: 9.5 percent market risk premium and 7 percent risk - free rate. Assume the company's tax rate is 35 percent. Find the WACC.
You are given the following information on Parrothead Enterprises: Debt: 8,500 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 106.75. These bonds pay interest semiannually and have a par value of $2,000. Common stock: 280,000 shares of common stock selling for $65.60 per share. The stock has a beta of 1.06 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. Preferred stock: 9,100 shares of 4.55 percent preferred stock selling at $95.10 per share. The par value is $100 per share. Market: 10.9 percent expected return, risk-free rate of 4.15 percent, and a 21 percent tax rate. Calculate the company's WACC.

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