Question

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Consider the following information for Evenflow Power Co., Debt: 3,500 6.5 percent coupon bonds outstanding, $1,000...

Consider the following information for Evenflow Power Co.,

Debt: 3,500 6.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 104 percent of par; the bonds make semiannual payments.

Common stock: 87,500 shares outstanding, selling for $55 per share; the beta is 1.2.

Preferred stock: 12,500 shares of 5.5 percent preferred stock outstanding, currently selling for $107 per share.

Market: 7.5 percent market risk premium and 4.5 percent risk-free rate. Assume the company's tax rate is 34 percent.

Required: Find the WACC. (Do not round your intermediate calculations.) rev: 09_20_2012 8.98% 9.63% 8.85% 9.25% 8.75%

Expert Solution

WACC is calculated using the follwoing equation:

Now let's calculate the various components of the above equation and then substitute the values in the WACC equation

Substituting the values in the WACC equation:

jeff jeffy answered 2 years ago

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