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1) what is the WACC for a firm 30 debt, 10% preffered stock, and 60% common equity if the respective costs for these components are 7% before tax cost of debt, 9% before tax cost of preffered stock, and 12% before tax cost of common equity? the tax rate is 40%

what is the WACC?


2) Smith corpration has a $1000 par value bond outstanding paying annual interest of 8% (coupon rate ) the bond matures in 10 years. if the present yield to maturity for this bond is 6% caculate the annual coupon payment (annual interest payment) and current price of the bond using annual compounding.


what is the annual coupon payment?


what is the current price of the bond?

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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

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Calculate the Components of WACC and the WACC

Use 4 decimals

Cost of Debt: 30 year Bonds

Current Price 98.6% of par value

7 % Coupon Rate

Semi Annual Bond

10 years to maturity

Tax Rate: 40%

What is the Cost of Debt? After Tax

Using the SML Asset W has an expected return of 11.3 percent and a beta of 1.20. If the risk-free rate is 2.4 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the relationship between portfolio expected return and portfolio beta by plotting the expected returns against the betas. What is the slope of the line that results? Bond 1: Bonds outstanding Years to Maturity Annual coupon rate Coupons per year Bond price (% of par) Bond 2: Bonds outstanding Years to Maturity Annual coupon rate Coupons per year Bond price (% of par) Common stock Shares outstanding Beta Share price Preferred stock outstanding Shares outstanding Coupon rate Share price Market Market risk premium Risk-free rate Tax rate Output Area: Capital Market Value Structure Cost Bond 1 before tax Bond 1 Bond 1 after tax Bond 2 before tax Bond 2 Bond 2 after tax Common stock Common Preferred stock Preferred Total firm $- 0.00% WACC Need the answer in an excel format

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