Solution-Compute the company market-based marginal wacc

Compute the company market-based marginal wacc

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Reference no: EM132634484

A company is considering the following additional capital structure:

10%, 10-year term, P1,000 par bond is currently selling to yield 12%. Total number of bonds to be issued is 2,000. Flotation cost for bonds is 1% of its par.
10,000 outstanding shares of 10%, P100 par value preferred stocks are selling currently to yield 12%.
The company has available retained earnings for capital budget amounting to P2 million.
20,000 Common stocks with a par value of P100. Similar stocks is yielding 12%. The current market risk premium is 4% and company's beta is 1.1. The common stock just paid a dividend of P2.75 per stock and expects an indefinite dividend growth of 6%.
The company's marginal tax rate is 35% and selling expenses in the issuance of preferred and common stock is P5 per stock..

Required:

Question 1: Compute the company's market-based/marginal WACC.

Reference no: EM132634484

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Compute the company market-based marginal wacc

Reference no: EM132634484

Reference no: EM132634484

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