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Compute what is the firm weighted average cost of capital

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Point 1: RZ Ltd has 80,000 bonds outstanding that are selling at par ($1,000 each bond). Bonds with similar characteristics are yielding 6.75 percent. The company also has 750,000 shares of preferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for $53 a share and pays $7 per share. The common stock has a beta of 1.34 and sells for $42 a share. The risk free rate is 2.8 percent and the return on the market is 11.2 percent. The corporate tax rate is 38 percent.

Question 1: What is the firm's weighted average cost of capital (WACC)?

Reference no: EM132524685

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