Problem 12-18 Calculating the WACC [LO 3]
You are given the following information concerning Parrothead
Enterprises:
Debt: | 9,800 7.3 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 106. These bonds pay interest semiannually. | |
Common stock: | 265,000 shares of common stock selling for $65.30 per share. The stock has a beta of .93 and will pay a dividend of $3.50 next year. The dividend is expected to grow by 5.3 percent per year indefinitely. | |
Preferred stock: | 8,800 shares of 4.65 percent preferred stock selling at $94.80 per share. | |
Market: | An expected return of 11.2 percent, a risk-free rate of 5.15 percent, and a 38 percent tax rate. |
Calculate the WACC for Parrothead Enterprises. (Do not
round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
WACC
%
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