Calculate weighted average cost of capital

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Reference no: EM132062745

Given the following information calculate the WACC for Stigum Inc. Assume the firm has a tax rate of 35%.

Debt: 220,000 bonds outstanding with 3.5% coupon rate. Par value of $1,000 per bond, 10 years to maturity, selling for 105% of par; the bonds make semi-annual payments. Flotation costs are $5 per bond.

Common stock: 7,500,000 shares outstanding, trading for $61.25 per share. The beta is 1.33.

Preferred stock: 1,000,000 shares of 8% preferred stock outstanding, currently selling for $134 per share, face value of $100 per share. Flotation costs are $4 per share.

Market: 12% expected return on the market and 3.5% risk free rate.

Calculate the weighted average cost of capital. (Enter percentages as decimals and round to 4 decimals)

Reference no: EM132062745

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