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In: Finance

You are given the following information for Pine Tree Energy Co. Assume the company’s tax rate...

You are given the following information for Pine Tree Energy Co. Assume the company’s tax rate is 35 percent.

  Debt:

10,000 7.2 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 104 percent of par; the bonds make semiannual payments.

  Common stock:

280,000 shares outstanding, selling for $63 per share; the beta is 1.14.

  Preferred stock:

17,000 shares of 3 percent preferred stock outstanding, currently selling for $69 per share.

  Market:

8 percent market risk premium and 3.5 percent risk-free rate.

What is the company's WACC?

Solutions

Expert Solution

Calculation of WACC is shown below

Working is given below

jeff jeffy answered 1 year ago
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