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21. Please solve in Excel; round to 3 decimal places. Company A has a single bond...
21. Please solve in Excel; round to 3 decimal places.
Company A has a single bond issue American bond (American bonds pay out interest semiannually); the bond has a 6.5% coupon, 9 years to maturity, trades at $1245 per $1000 face value with a face value of $600,000. The cost of equity of 11%, cost of preferred stock of 8%. The company has 120,000 shares of common stock outstanding selling at $30 per share. It has 50,000 shares of preferred stock outstanding selling at $25 per share. The tax rate is 30%.
What is Company A's WACC (please solve in Excel)?
Solutions
Expert Solution
WACC=((After-tax Cost of debt*Market value of debt)+(Cost of Equity*Market value of Equity)+(Cost of preferred*Market value of Preferred))/(Market value of Debt + Market value of Equity+Market value of Preferred)
Annual Cost of debt formula Excel = rate(number of periods, coupon payment, -market value, face value, 0, rate guess)*2
After-tax cost of debt= Before tax cost*(1-tax rate)
WACC is 9.17%
jeff jeffy answered 6 months agoRelated Solutions
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