Compute what is the firm WACC

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Reference no: EM133044178

Question - Given the following information about ABC corporation:

Book Value Security Amount ($ millions) Common Stock 10

Preferred Stock 5

Bonds 5

Retained Earnings 2

Total 22

The common stock is currently trading at $10/share and there are 1 million shares outstanding. The firm has a Beta of 1.2, the economy's risk-free rate is 2% and the equity market premium is 4%. ABC's preferred stock is trading at $12/share and there are also 1 million shares outstanding. The par value of the preferred stock is $5 and it has a dividend yield of 20%. A series of 5,000 bonds were issued with a face value of $1,000. These bonds are now currently selling at $960 each. The bonds have a 10-year maturity and a coupon rate of 10% paid semi-annually. The firm's corporate tax rate is 30%. Compute what is the firm's WACC?

Reference no: EM133044178

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