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Pottery shed capital structure

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Reference no: EM131772466

The following information pertains to The Pottery Shed's capital structure and costs of capital. The tax rate is 40 percent. Find WACC.

  • Debt: There are 50,900 annual bonds outstanding with a coupon rate of 12 percent, 30 years to maturity, and $1,000 par value.Each bond is currently selling for 102.6 percent of par.
  • Common stock: There are currently 11,000,000 shares of stock outstanding.Each share sells for $31.68.The Pottery Shed consistently pays dividends, and has a constant dividend growth rate of 6 percent.The most recent dividend paid was $2 per share.
  • Preferred stock: The firm has 75,000 preferred shares outstanding.Each 10.5 percent preferred share has a par value of $100 and sells for $107.
  • Market: The risk-free rate is 2.8 percent, and the market risk premium is 6.5 percent.

Reference no: EM131772466

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