Given the following information for XYZ Co., you want to find the cost of capital (WACC). The firm’s tax rate is 40%. Ignore all the flotation cost.
Debt:8,000 7% coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 95% of par; the bonds make semiannual payments.
Preferred stock: 20,000 shares of 7% preferred stock outstanding, $100 par value, currently selling for $90 per share.
Common Stock: 300,000 shares outstanding, selling for $50 per share; the beta is 1.25. Currently, the market risk premium is 8%, and the risk-free rate is 3%.
What is the cost of debt?
What is the cost of preferred stock?
What is the cost of common stock?
Compute the amount of each component of capital (amount of debt, amount of preferred stock, and amount of common stock).
Given the above information, what is the cost of capital?
Debt:8,000 7% coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 95% of par; the bonds make semiannual payments.
Preferred stock: 20,000 shares of 7% preferred stock outstanding, $100 par value, currently selling for $90 per share.
Common Stock: 300,000 shares outstanding, selling for $50 per share; the beta is 1.25. Currently, the market risk premium is 8%, and the risk-free rate is 3%.
What is the cost of debt?
What is the cost of preferred stock?
What is the cost of common stock?
Compute the amount of each component of capital (amount of debt, amount of preferred stock, and amount of common stock).
Given the above information, what is the cost of capital?