Information on Gerken Power Co., is shown below. Assume the
company’s tax rate is 34 percent.
9,600 9.1 percent coupon bonds outstanding, $1,000 par value, 24 years to maturity, selling for 98.5 percent of par; the bonds make semiannual payments.
|Common stock:||221,000 shares outstanding, selling for $84.10 per share; beta is 1.26.|
13,100 shares of 5.8 percent preferred stock outstanding, currently selling for $96.90 per share.
|Market:||7.05 percent market risk premium and 4.85 percent risk-free rate.|
What is the company's cost of each form of financing?
|Cost of equity||%|
|Aftertax cost of debt||%|
|Cost of preferred stock||%|
Calculate the company's WACC.
Calculate the WACC by using the following formulas:
Get Answers For Free
Most questions answered within 1 hours.