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Zacks's target capital structure is 39% long-term debt, 11% preferred stock, and 50% equity. The firm...

  • Zacks's target capital structure is 39% long-term debt, 11% preferred stock, and 50% equity.
  • The firm has one outstanding 16.92% bond issue that matures on May 13, 2035, makes semiannual payments, and currently sells for $900 per bond. Assume that May 13, 2020, is the settlement date for the bond issue.
  • Odarian's preferred stock pays an annual dividend of $15.32 and currently sells for $93.34.
  • The company's common stock's returns have a covariance of 0.00467206952 with the market's returns. The variance of the market's returns is 0.001883899. The market risk premium is 13.92 percent, and the risk free rate of return is 3.64 percent.
  • The company's marginal tax rate is 21%.
  1. ( What is Zack's weighted average cost of capital?

PLEASE USE EXCEL AND SHOW FORMULAS

Solutions

Expert Solution

Weighted average cost of capital (WACC) = sum of weighted costs of capital

WACC = 26.72%

Calculations:

Formulas:

jeff jeffy answered 1 year ago
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