Assume the company tax rate-debt

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Information on Gerken Power Co., is shown below. Assume the company’s tax rate is 40 percent. Debt: 8,900 8.2 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 214,000 shares outstanding, selling for $83.40 per share; beta is 1.19. Preferred stock: 12,400 shares of 5.95 percent preferred stock outstanding, currently selling for $97.60 per share. Market: 7.2 percent market risk premium and 5 percent risk-free rate.

Reference no: EM131599971

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