Question

6. Use the following information to find the weighted average cost of capital for Ashman Motors....

6. Use the following information to find the weighted average cost of capital for Ashman Motors.

Debt:

4,500 six percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 102 percent of par; the bonds make semiannual payments.

Common Stock:

100,000 shares outstanding, selling for $43 per share; the beta is 1.3

Preferred Stock:

13,000 shares of 9 percent preferred stock outstanding. Face value of $100 and currently selling for $104 per share.

Market:

8 percent market risk premium and 3 percent risk-free rate

Tax:

Marginal tax rate of 35 percent

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