Question
In: Finance
You are given the following information for Lightning Power Co. Assume the company's tax rate is...
You are given the following information for Lightning Power Co. Assume the company's tax rate is 25 percent.
Debt: 15,000 6.4 percent coupon bonds outstanding$1,000 par value, 28 years to maturity, selling for 106 percent of par, the bonds make semiannual payments.
Common Stock: 480,000 shares outstanding, selling for $66 per share; beta is 1.17.
Preferred Stock: 21,000 shares of 4.2 percent preferred stock outstanding, currently selling for $87 per share. The par value is $100 per share.
5 percent market risk premium and 5.3 percent risk-free rate.
what is the companys WACC
Solutions
Expert Solution
The company's WACC is 8.77%
Table is provided below:
| Shares/Bonds | Price | Market value | Rate | Weight | Weight*Rate | |
| Debt | 15,000.00 | 1,060.00 | 15,900,000.00 | 5.96% | 32.18% | 1.44% |
| Common stock | 480,000.00 | 66.00 | 31,680,000.00 | 11.15% | 64.12% | 7.15% |
| Preferred stock | 21,000.00 | 87.00 | 1,827,000.00 | 4.83% | 3.70% | 0.18% |
| WACC | 8.77% | |||||
Formulas used can be seen in the image attached below:
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