bonds $36,000,00 preferred stock is $1,800,000 and common stock is $6,000,000 to finance the purchase,

Question

bonds $36,000,00 preferred stock is $1,800,000 and common stock is $6,000,000 to finance the purchase, Coledonia will sell 10 year bonds paying 6.8% per year at the market price of $1053. Preferred stock paying %2.04 dividend can be sold $25.99; Common stock is currently selling for $55.39 per share. The firm paid a $3.01 dividend last year and expects dividends to continue growing at a rate of 4.7% per year. The firm tax rate is 30%. what is the WACC?

Answer 1

 

Answer: .06231

 Debt Total : $43.8M

 

Bonds

(semi annual interest, purchased at a premium)  : .05590

$36.0M : 82.2% of total      

wacc : 82.2%*6.8%

 

Preferred Stock

(dividends) :  .00084

$1.8M : 4.1% of total

wacc : 4.1%*2.04%

 

Common Stock

(dividends) :  .00557

$6.0M : 13.7% of total  

wacc : 13.7%*4.7%