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An all-equity company has common and preferred shares. There are 250,000 common shares outstanding with a...

An all-equity company has common and preferred shares. There are 250,000 common shares outstanding with a price of $51.10 per share and with an expectation to continue to provide a dividend of $5.30 per share. There are 50,000 preferred shares outstanding, with a 5.74% dividend, $100 par value per share, and $80.50 market value per share. Given this information, what is the company's WACC? Question options: 9.12% 9.36% 9.60% 9.84% 10.08%

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Answer #1
Cost of equity = 5.3/51.1
Annual dividend /Price today
10.37%
Cost of preferred stock = 100*5.74%/80.5
Annual dividend /Price today
7.13%
i ii iii iv=ii*iii
Source Value Weight cost WACC
Equity 12775000 76.04% 10.37% 7.89%
Preferred share 4025000 23.96% 7.13% 1.71%
16800000 9.60%
Answer = 9.60%
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