In: Finance
Consider the following information for Watson Power Co.: |
Debt: | 4,000 6.5 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. | ||
Common stock: | 88,000 shares outstanding, selling for $61 per share; the beta is 1.09. | ||
Preferred stock: | 12,500 shares of 5.5 percent preferred stock outstanding, currently selling for $105 per share. | ||
Market: |
8 percent market risk premium and 4.5 percent risk-free rate. |
Assume the company's tax rate is 35 percent. |
Find the WACC. |