Reference no: EM132508979

Torrance, Inc. wishes to invest in a new project. Please utilize the below information to calculate the firm's Weighted Average Cost of Capital, which Torrance, Inc. will use as the project's discount rate.

a. Tax rate = 35%

b. Torrance, Inc. bonds currently have a semi-annual 20-year maturity, a 10% coupon with $1,000 par value, and the bonds current price is $1,350.

c. Torrance, Inc. holds 10%, $100 par value, annual dividend, perpetual preferred stock, which sells for $120.

d. Torrance, Inc.'s beta is 1.24; the risk-free rate is 4%, and the market risk premium is 5%.

e. The firm's target capital structure is 35% debt, 10% preferred stock, and 55% common equity.

Question 1: Calculate Torrance, Inc.'s current cost of debt.

Question 2: calculate Torrance, Inc.'s current cost of preferred stock.

Question 3: calculate Torrance, Inc.'s current cost of common stock.

Question 4: calculate Torrance, Inc.'s weighted average cost of capital.