In: Finance
Consider the following information for Watson Power Co.: |
Debt: | 4,000 8.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. | ||
Common stock: | 88,000 shares outstanding, selling for $64 per share; the beta is 1.18. | ||
Preferred stock: | 13,000 shares of 7.5 percent preferred stock outstanding, currently selling for $106 per share. | ||
Market: | 9 percent market risk premium and 7.5 percent risk-free rate. | ||
Assume the company's tax rate is 34 percent. |
Find the WACC. |