Problem - Calculating the WACC
Question # 00766520
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Updated on: 06/23/2020 02:54 PM Due on: 06/27/2020
Problem - Calculating the WACC
You are given the following information concerning Parrothead Enterprises:
Debt: 10,000 6.9 percent coupon bonds outstanding, with 15 years to maturity and a quoted price of 104. These bonds pay interest semiannually.
Common stock: 275,000 shares of common stock selling for $68.50 per share. The stock has a beta of .85 and will pay a dividend of $3.25 next year. The dividend is expected to grow by 5 percent per year indefinitely.
Preferred stock: 8,000 shares of 4.9 percent preferred stock selling at $94 per share.
Market: 12 percent expected return, risk-free rate of 3.5 percent, and a 35 percent tax rate.
Required - Calculate the WACC for Parrothead Enterprises.
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Rating:
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