Question

The charter company has the following financing outstanding. What is the WACC for the company?

Debt: 40,000 bonds with a 8% coupon rate and a current price quote of 1200 the bonds have 25 years to maturity. 150,000 zero coupon bonds with a price quote of 185 and 30 years to maturity.

Preferred Stock: 100,000 shares of 5% preferred stock with a current price of $78, and a par value of $100.

Common Stock: 1,800,000 shares of Common Stock; the current price is $75. And the beta of the stock is 1.2.

Market: The corporate tax rate is 40%, the market risk premium is 7%, and the risk free rate is 4%

Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir

Answer 1

Case 1: Coupon is paid annually
=(40000*1200*RATE(25,8%*1000,-1200,1000)*(1-40%)+150000*185*RATE(30,0%*1000,-185,1000)*(1-40%)+100000*78*(5%*100/78)+1800000*75*(4%+1.2*7%))/(40000*1200+150000*185+100000*78+1800000*75)
=9.1697%

Case 2: Coupon is paid semi-annually
=(40000*1200*RATE(25*2,8%*1000/2,-1200,1000)*2*(1-40%)+150000*185*RATE(30*2,0%*1000,-185,1000)*2*(1-40%)+100000*78*(5%*100/78)+1800000*75*(4%+1.2*7%))/(40000*1200+150000*185+100000*78+1800000*75)
=9.1647%