Weighted average cost of capital assuming additional equity

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Reference no: EM131546332

Your firm is in the 40% marginal tax bracket. the coupon rate of its outstanding $1,000 par bond issue is 6.5%. The bonds will mature in 17 years, are currently selling for $850.00, and have annual coupon payments. There are existing per preferred stocks outstanding that are selling in the secondary market for $60 and have an annual dividend of $7.50. the firm's beta is 1.6, the risk free rate is 4%, and the average stock has a return of 12%. Your target capital structure calls for 25% debt, 5%preferred stock, and 70% common equity. Compute the weighted average cost of capital assuming all additional equity will be acquired through retained earnings rather than by selling additional common stock.

Reference no: EM131546332

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