Question

2. Fast Cash Limited has the following information and a tax rate of 30 percent. .

Debt	700, 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 95 percent of par, the bonds make semi-annual payments
Common stock	350,000 shares outstanding, selling for $60 per share; the beta is 1.05
Preferred stock	8,000 shares of 6 percent preferred stock outstanding, currently selling for $115 per share
Market	7 percent market risk premium and 4 percent risk-free rate

Determine the company’s WACC by computing the following:

1. Total Market value for the company.   (3 points)
2. After-tax Cost of Debt. (Rounded to 2 decimal places) (2 points)
3. Cost of Common Stock (Rounded to 2 decimal places) (2 points)

(d) Cost of Preferred Stock (Rounded to 2 decimal places) (2 points)

(e) WACC (Rounded to 2 decimal places) (2 points)

Answer 1

Below is the answer